Earnings season provides ample opportunity for options traders if you know where to look! It can tend to sneak up on traders and be here again before you know it. That’s why it’s best to prepare and anticipate upcoming earnings seasons so that you can take part in the action.
A big part of my preparation for earnings season includes creating my personalized ‘Top Tickers to trade’ calendars that I use throughout earnings season. These calendars are critical because when you’re in the midst of the trading day, you need to be executing trades, not doing research!
I like to do my research in the evenings and on the weekends, especially when I’m getting ready for a show on FoxBusiness or CNBC. It’s easier for me to focus on my reading when the market isn’t moving as it is during the day. It’s during this focus time that I create my watchlist and, most of all, my earnings calendar.
Creating an Earnings Calendar
A question you might ask would be, “Why do you need to create an earnings calendar when there are so many free resources available?”
The answer is simple. Yes, there are tons of free resources, but they include an ocean’s worth of data, when I only want to focus on a specific beach. Knowing that 200+ companies report earnings on any given day is just the beginning, and it doesn’t get me any closer t making an actual trade.
That is why I have to comb through these free resources, create watchlists, and narrow them down to what I’m looking for.
Identifying Optionable Tickers
As an options trader, it’s important to me to identify tickers that trade in the options market. This is because I want to take advantage of the unique facets of options, such as premium decay, implied volatility, and neutral as well as directional opportunities.
Sure, I can (and sometimes do) trade stock if the ticker doesn’t trade in the options market, but I love the flexibility and opportunities that options provide, in addition to the leverage.
By using options, I can take one of my favorite actions, which is selling premium. Earnings season is a great time to sell premium in the options market because the premium has expanded, making options more expensive than normal. The price of options increases going into volatile events, such as an earnings report.
This is a pattern that I like to take advantage of quarter over quarter.
Honing in on Volatility
Traders often think that calling a direction related to a stock’s moves surrounding earnings is the only way to capitalize in the stock market, but that is not the case! Traders can also focus on neutral and volatility-based trading as well.
While I do enjoy a fantastic directional move, as I’ve advanced in my career, I’ve learned the value of ‘boring’ premium-selling strategies and volatility-based trading. When trading volatility, it can take the pressure off of traders who struggle to identify a direction. This is because, with this type of trading, it doesn’t necessarily matter which direction the stock price moves if they are focused on trading a rise and fall in volatility.
Want to learn more? Be on the lookout for the next episode of Five Star Trader, where I’ll discuss directional, neutral, and volatility-based strategies surrounding earnings season. Sign up so you don’t miss it!
Be on the lookout for my upcoming webinar on Wednesday, October 11th where I’ll reveal even more.
P.S. Want to check out my Top Tickers to Trade calendars? Follow me on Twitter!
