Earnings Play Strategies

In This Lesson

Trading around earnings announcements.

Duration: 25 min

Overview

Trading around earnings announcements. This lesson will provide you with practical knowledge and actionable insights you can apply to your trading immediately.

By the end of this lesson, you'll have a clear understanding of the concepts and be able to apply them in real trading scenarios. Let's dive into the details.

Key Concepts

Pre-Earnings Run-Up

Stocks often rally 5-10% into earnings on anticipation. Trade the anticipation, not the event.

Post-Earnings Drift

After initial reaction, stocks trend in direction of surprise for days/weeks.

Earnings Straddles

Buy both call and put to profit from big moves regardless of direction.

Historical Patterns

Some stocks have consistent earnings patterns. Track and trade accordingly.

Practical Application

Now let's put this knowledge into practice. Follow these steps to apply what you've learned:

1. Track earnings dates for your watchlist using earnings calendar
2. Note pre-earnings price action: accumulation or distribution?
3. Check historical earnings moves: how much does stock typically move?
4. For options: calculate if expected move exceeds option prices
5. Set rules: exit positions 1-2 days before earnings or reduce to 25%
6. After earnings: wait for first pullback before entering new positions

Common Mistakes to Avoid

Holding Through Earnings

Earnings are 50/50 gambles. Even beating estimates can result in selloffs.

Buying After Big Gaps

Chasing 20% gaps after earnings often leads to buying exhausted moves.

Ignoring IV Crush

Options lose 30-50% of value post-earnings even if direction is correct due to volatility collapse.

Key Takeaways

Earnings are catalysts, not gambling events - trade the setup, not the news
Pre-earnings positioning often offers better risk/reward than the event
Post-earnings trends can last weeks - patience pays
IV crush makes buying options through earnings usually unprofitable
Historical patterns repeat - study past earnings reactions

Your Next Steps

Ready to continue your learning journey? Here's what to do next:

• Review this lesson's key concepts
• Complete the practical exercises
• Take notes on what you've learned
• Practice with a demo account
• Move on to the next lesson when ready