Here are Goldman's top tactical trades as earnings season heats up

Published Tue, Jan 18 202210:43 AM EST

Jesse Pound @/in/jesse-pound @jesserpound

Earnings season is in full swing, and that creates a prime opportunity for options trades, according to Goldman Sachs. The firm's derivatives research team said in a note to clients on Jan. 12 that there are many companies with potential upside from their upcoming earnings reports, as expectations appear to be lower this quarter. "We believe a focus on idiosyncratic opportunities will be the best source of alpha over the next quarter. Following several beat-and-raise quarters, aggregate estimate revisions slowed significantly over the past three months. Further, the tailwinds from macro flows and options positioning that we identified ahead of the past few quarters are no longer present," the note said. The firm put together a list of buy-rated stocks in which its analysts were most out of consensus with others on Wall Street. These situations could be played by purchasing call options, which are bets that a stock will rise past a set "strike price" before expiration. One early reporting company on Goldman's list is Bank of America . The major banks have had a rough earnings season so far, with shares of JPMorgan and Citigroup falling after their reports. However, Wells Fargo did earn a one-day pop after beating expectations for its fourth quarter. Bank of America is set to report earnings on Wednesday, Jan. 19. Another big name on the list is Boeing . The aerospace stock has gained traction in the early days of the year, rising about 13% thus far for 2022. However, the company still has some skeptics on Wall Street, with hold or sell ratings from 31% of analysts, according to FactSet. For investors looking to bet on a rebound, Lowe's also makes Goldman's upside list. The stock has underperformed the S & P 500 in the early days of 2022, but it did outperform last year. There are also some companies that Goldman analysts believe are likely candidates for downside surprises. For these earnings events, investors could purchase put options, which allow the holder to sell a stock at a set price. Put options serve as bets that the share price will decline. The downside surprise candidates all have sell ratings, including Krispy Kreme . Goldman downgraded the stock on Dec. 1 , saying the company would struggle to handle inflation. -CNBC's Michael Bloom contributed to this report.

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