Earnings season is getting started, providing plenty of potential opportunities for options traders.
Unlike buying or selling stocks outright, trading options allows investors to express much more specific viewpoints. In the context of earnings, that means that traders can bet a stock will rise or fall specifically on the news event, or that it will make either a larger or a smaller move than the market is expecting.
For this earnings season, Goldman's options research team suggested four trades in a Wednesday note to clients: Buying bullish call options on PepsiCo, buying bullish call options on Dow Chemical, and buying "straddles" on semiconductor stock Sanmina and on networking company JDS Uniphase.
A straddle is a trade composed of buying both a put option and a call option, and it is designed to profit if a stock moves more than implied by options prices.