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Finding quarterly patterns

Hey Five Star Trader,

In the world of trading, there aren’t many ‘repeats’ in the stock market. Macro conditions, trends, hot stocks, and elected officials change, and the market changes with them. But there is one event that occurs regardless of any of these other aspects. What is it, you might ask? Earnings reports. Publicly traded companies must report earnings to investors, each and every quarter. They report their earnings per share, revenue numbers, and forward guidance, along with recent changes, positives, and drawdowns to their shareholders and ultimately, the world.

During the rollout of these reports, unique market conditions begin to form. From here, traders can learn to identify a range of patterns, and therefore trade setups, to take advantage of. This is especially true in the options market. More specifically, options traders should be taking advantage of implied volatility (which rises and falls, on the calendar), momentum into the event, and quick price fluctuations.

Here are a few of my favorite tips and tricks for earnings season:

1) Create a calendar
Traders should know that earnings appear on a calendar system, without fail. One of my favorite things to do is create a calendar with all the reports coming up. I have them set to start 2-3 weeks before the actual report, and then again on the day of the actual report so I’m notified to be on the lookout for potential setups surrounding specific tickers.

 

2) Know the types of earnings trades
There three distinct moments in time that each report can be traded with. This includes the
run into earnings, earnings reports themselves, and post-earnings moves.

Click here for a more in-depth breakdown of these moments in time.

3) Start out slow

There is a lot of opportunity with earnings trades, but it’s also easy to overwhelm yourself. If you are new to trading earnings, try narrowing your focus to only a few tickers at a time. When I first started learning how to trade earnings, I always found that it’s always better to nail a few good moves than trying to catch them all and missing.


Want to learn more about how to take advantage of quarterly gains? Join me for my free webinar on Wednesday, March 31st, at 7:00 pm Central. We’ll be covering setups, case studies, and more.

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