This options strategy for earnings is returning 38% — and Goldman says there's still time to try it

Published Wed, Aug 3 202212:01 PM EDT

Jesse Pound @/in/jesse-pound @jesserpound

Many major second quarter earnings reports have come and gone, but they have revealed a pattern that investors can still take advantage of in coming days, according to Goldman Sachs. The firm's derivatives research team, led by Vishal Vivek, said in a note to clients on Wednesday that stocks are seeing a nice post-earnings pop this quarter. "The average stock reporting earnings so far this quarter has traded up 0.8% on their earnings day. Investors that bought calls five days ahead of each earnings report have seen +38% average return on premium so far this earnings season," the Goldman note said. "Looking ahead, we recommend buying calls or replacing stock positions with call options ahead of the remaining earnings reports." A call option is a contract that gives the holder the right to buy a stock at a set strike price in the future. It serves as a bet that a stock will rise above the strike price before the option expires, allowing the holder to then buy the stock at a discount to the market, or sell the option back into the market at a higher price. When buying call options, the risk is capped at the premium paid for the contract, and those premiums have generally declined in recent weeks, according to Goldman. The firm put together a list of stocks with upcoming earnings reports that have underperformed the S & P 500 over the past three months, which could be a sign that any rebound has room to turn into a big rally. Two of the largest stocks on the list by market cap are Atlassian Corp. and Suncor Energy . Both companies are slated to report their latest results on Thursday, Aug. 4. The two stocks have underperformed the S & P 500 by 7% and 6%, respectively, over the past three months, according to Goldman. One positive for Suncor could be this year's strength in the energy sector. While earnings season has seen mixed overall, energy has been a more consistent bright spot. Shares of Exxon and Chevron jumped on Friday after those oil giants reported record profits . Another company reporting on Thursday is Shake Shack . Shares of the restaurant chain have lagged the market even more over the past three months, trailing by 14%, according to Goldman. Tuesday's earnings report from Starbucks could be good news for Shake Shack. The coffee chain beat Wall Street estimates and said it has not seen evidence of customers trading down to lower-priced items to deal with inflation. For investors who want to take advantage of the full five-day period before a company reports earnings, Goldman's list includes two names that report next week: IAC and Maxar Technologies . — CNBC's Michael Bloom contributed to this report.