Don't Miss These Investor Days in September. How to Trade Them with Options

On one hand, the mixed signals from Friday's nonfarm payroll report and subsequent comments from Federal Reserve officials have failed to provide the clarity investors seek regarding the size of expected September rate cut. This indecision from the Fed has left a divergent market without clear direction. Compounding these challenges, the enthusiasm that once buoyed market sentiment around the AI theme appears to be further waning. Concerns about the monetization capabilities of AI and the sustainability of massive capital expenditures in the sector are growing, impacting AI stocks across the entire supply chain. Additionally, fears of a recession and uncertainties surrounding the upcoming U.S. elections are further weighing on market sentiment.

Now, Goldman Sachs has put forth an option trading strategy regarding the upcoming investor days in September. According to a report from Goldman Sachs' derivatives team sent to clients earlier this month, their research indicates that buying call options around analyst days has proven to be a systematically profitable strategy over the past 20 years.

As the earnings season comes to a close, several companies are set to host investor days or analyst days in September. During these meetings, companies typically provide more detailed insights into their daily operations, business strategies, and financial outlooks, including updates on their latest product developments, forward-looking guidance, and future plans. Unlike earnings results, which can vary widely, the information shared during these less frequent investor days tends to be more uplifting. Such disclosures have the potential to prompt analysts to adjust their earnings models, which can subsequently be reflected in research reports, target prices, and ratings. Moreover, this information can foster more positive expectations and boost market sentiment surrounding these companies.

John Marshall, head of Goldman Sachs' derivatives research, indicated in a report earlier this month that a straightforward trading strategy of buying call options five days prior to analyst days and selling one day after could yield profitable results. Over the past 20 years, this systematic call-buying strategy has been profitable 90% of the time, with an average +18% return on premium. It's important to note, however, that the strategy is not without its flaws, as macro trends overshadowed its returns in 2008 and 2022. It has also been shown to be profitable in 2024, generating an average +20% return on premium across 102 observations. The team attributes the high success rate of this strategy to the positive bias in stock performance on analyst day and the undervalued upside asymmetry.

Additionally, due to the options market's failure to adequately price the volatility surrounding these events, purchasing straddles around analyst days has averaged a +6.0% return over the past 20 years, with profitability each year, although such returns may seem modest this year.