Goldman Sachs (GS, $178.29, up $11.54) is slated to report earnings before the opening bell Tuesday. The stock had a huge day Friday as traders positioned themselves ahead of the announcement. The financial stocks have been a train wreck as of late and there has been no compelling reasons to buy them.

Goldman tends to exhibit extreme volatility when it reports and most analysts expect earnings will come in below expectations due to write-downs on leveraged loans that could be larger than anticipated. This will likely be key to their earnings report. If write-downs come in well above expectations then the stock could take a beating. I’m not brave enough to stick my toes in the water with this one but some traders love swimming with the sharks. Take a look at the action in the June option chain for Goldman from Friday. Two strike prices of emphasis:

June 180 call (GPYFP, $4.80, up $3.12)

June 170 put (GPYRN, $3.10, down $4.90)

Both contracts had volume of 10,000 and a 10%-20% move in the stock can be expected over the next couple of days. Some option traders also appear to be playing a strangle on Goldman ahead of earnings. The June 160 puts (GPYRL, $1.50, down $2.65) and the June 190 calls (GPYFR, $1.03, up $0.71) seemed like a logical combination.

Lehman Brothers Holdings (LEH, $25.81, up $3.11) which had a huge 14% move Friday reports earnings today. Merrill Lynch (MER, $38.00, up $1.72) and Morgan Stanley (MS, $41.04, up $2.66) had a big day as well. Keep an eye on these stocks as they could be the wildcards for a higher or lower market this week.

Rick Rouse