Over the last two years, the first part of July has been a popular time for companies to preannounce their earnings. Goldman Sachs analysts note that movements have been “dramatic” during the beginning of July in the last two years, particularly in the tech sector.

Earnings

They issued a report to investors outlining their reasons for buying either put or call options on Yahoo Inc (NASDAQ:YHOO), Intel Corporation (NASDAQ:INTC), Google Inc (NASDAQ:GOOG) and Eli Lilly & Co. (NYSE:LLY), particularly for the first half of July.

The Case For Yahoo Calls

They give Yahoo Inc (NASDAQ:YHOO) a buy rating on the July $25 at 75 cents call option because they see the potential for a relief rally on July 16 when the search giant releases its next earnings report. They point to the stock’s recent underperformance and also the possibility of a multi-year high skew, particularly if Yahoo Inc (NASDAQ:YHOO)’s results are better than expected.

Goldman Sachs analyst Heath Terry’s earnings per share estimate for Yahoo’s next quarter is 7 percent above consensus, and he believes progress in the launch of the Yahoo Sports app and product renewals at Flickr, Mail and Weather will “drive early signs of improved engagement at its core properties, particularly in mobile.” He believes a relief rally is ahead for the stock because fear levels surrounding the search giant are high ahead of its next earnings report.

The Case For Intel Puts

Goldman Sachs believe investors should buy Intel Corporation (NASDAQ:INTC) on July $24 put options at 73 cents because of the company’s challenging outlook. The company’s earnings report will be out on July 17, and analyst James Covello sees a 33 percent downside risk to Intel over the next year. He believes investors are “too complacent” regarding Intel before its earnings because of declining PC sales.

He notes that Intel shares have outperformed this year and that if PC data points remain week, the chip maker will simply build inventor, which will result in a cut to its wafer loadings. This puts a risk to the company’s margins. Covello’s earnings per share estimate is 9 percent below Wall Street estimates.

In spite of the risks, Goldman Sachs sees Intel Corporation (NASDAQ:INTC) options as attractive, especially puts, because they believe the options market is adding in a 3 percent plus or minus move for the stock in this earnings report. They believe if Intel shares move down 6 percent on the company’s earnings this quarter, the $24 July puts may see a 2.5 to 1 payout.

The Case For Google Straddles Earnings

They see options for Google Inc (NASDAQ:GOOG) aiming towards a July $880 straddle at $48.30 before the company’s next report on July 18. The search giant’s shares have either gained or lost 5 percent on each of its last eight earnings reports, in addition to the average daily move of plus or minus 1 percent.

They believe that investors will be able to buy the straddle for Google’s earnings move and take the next two and a half weeks pre-earnings “at a substantial discount.” They said one possible driver of low option prices before Google Inc (NASDAQ:GOOG)’s next earnings report is the high dollar price of the stock. Their study indicates that buying options on stocks valued at more than $100 per share before earnings has outperformed option buying strategies on those with lower prices. They tie this to options sticker shock.

The Case For Eli Lilly Calls

Finally, they believe Eli Lilly & Co. (NYSE:LLY) call options for September $50 at $2.41 look attractive ahead of the drug maker’s July report. They believe the stock could hit $55 or $56 per share if the company reports positive data on its breast cancer drug, which is undergoing testing currently. They don’t believe that option investors are putting in a volatility premium for the stock to move.