It's been a great earnings season for options traders.
A few weeks ago, Goldman Sachs' options research team looked at the historical returns that would have been yielded by a strategy of buying at-the-money call options on stocks five days before their earnings, and selling them the day after.
Since a call represents the right to buy a stock for a certain price within a given time, this is a bullish strategy that would tend to profit as a stock rises. And since the average stock rises on earnings, those call options tend to pay off, Goldman found.
Generally, the strategy has yielded a profit of 14 percent, and 16 percent when it comes to stocks with liquid options. But as it happens, the first 38 companies with liquid options that have reported earnings have shown call buyers a return of 48 percent, tracking for one of the best years in Goldman's study going back to 1996.
More recently (and outside the timeframe of the Goldman note), the 380-strike call on Amazon expiring in May was trading for about $17 on April 17. On Friday, Amazon shares rose 14 percent on earnings, and as of the close, that same call was worth $66.15. That's a 290 percent profit in a week.