New traders do not know how to trade the earnings season. This post will help you to trade the earnings season. If you do not know when the earning season comes – they fall end of fiscal quarter. This means that earnings seasons fall in January, April, July and October. Corporate earnings are released to the public during earning season – stocks move a lot during this season at least for 5 trading days after the result is out.
If you are a momentum trader you will find earning season to be a great time to enter trades. You can take the benefit of gap up and down in reaction to quarterly earnings reports. Especially the mid caps will give you great opportunity to trade. On top of that finding direction gets easy as well. If the earnings are as per expectation of the market the stock will likely go up, if the earnings are not as per expectation of the market or bad, the stock will go down. You can take trades accordingly.
There are plenty of stocks to trade so even if you miss an opportunity you will get another soon.
Why There Is Huge Volatility During Earnings Plays
Fact is that there are more speculative traders than non-speculative traders. Speculative traders take their positions much before the result is out. They just go as per the market expectation – this is the reason you will see that the stock starts moving a few days before the result is out.
Most of the speculative traders get the direction wrong and pay a price. Stops are hit and the stocks take a different direction. This is the reason sometimes stock does not go in the expected direction of the results.
Please also note that stocks gets too volatile during earnings season because everyone including long term investors, short term investors, swing traders and derivative traders gets active in a stock. Big players also enter here to make some money. Sudden volume increase makes the stock volatile.
What Strategy To Deploy To Take Benefit During Earnings Plays
Since the stock may move in either direction a long straddle may be deployed. A long straddle is when a trader buys both calls and puts to take benefit of the volatility. But note that long straddle may get risky if the stock does not move. Also a drop a VIX of the stock after the result is over may drastically drop the options premium too. This may also cause the damage. Therefore its better to hedge your positions. Still if you want to trade the long straddle then its better to reduce the lot size to take less risk.
Its better to enter stocks that are historically known to make 10% move the result week. Once the result is out these stocks will move 8-10% in one direction and then depending on the situation change the direction, stay there for some time or reverse direction. You can take benefit of this move and make some good money.
Some stocks move more than 10% – keep moving in the same direction for weeks or months. However if you are a trader you must take your profits out and exit the position and then look for another opportunity.
Earning season comes around four times a year, and usually lasts for 2-3 weeks. So you have enough time to make good money during this time.
Other Notes to Keep in Mind During Earnings Season
You Can Read More On My Site
What you should do now1. If you have still not subscribed for my free 5 days course you can do by filling the form above. You will learn a lot about option trading.
2. If you are a new option trader, not much experienced and are making losses you can do my paid course. I recommend Nifty Conservative Option Course for beginners because it is easy to understand and easy to trade. Even a 18 year old young trader or a housewife can learn it and start trading from next day. It will help you to earn consistent monthly income without any software or speculation or stress or big risk. You will learn proper hedging strategies that works in any market condition.
3. If you are banknifty weekly options trader you can do my Bank Nifty Weekly Options & Futures Strategy Course. You will learn future and option hedging strategies that works in volatile market condition.
TestimonialsWhat Traders Say About My Course
Course fees: Click here to know the course fees.
Here is complete process of my course1. Once you pay I will send you the course materials for studying to your email.
2. You read and ask me questions via phone/whatsapp/email to clear doubts.
3. Then you start paper trading and still can ask me questions.
4. After about one month you can start trading.
5. Since doubts can come anytime the support will be there for one year.
Within one month you can start trading on your own. No need to depend on anyone once you are on your own.
If you have any question you can contact me.
You can read about me here and my trading mistakes here.
Dilip Shaw, Founder
INCOME DISCLAIMER: Any references in this site of income made by the traders are given to me by them either through Email or WhatsApp as a Thank You message. However every trade depends on the trader and his level of risk taking capability, knowledge and experience. Moreover stock market investments and trading are subject to market risks. Therefore there is no guarantee that everyone will achieve the same or similar results. My aim is to make you a better & disciplined trader with the stock trading and investing education and strategies you get from this website. Please note that I DO NOT give tips or advisory services by SMS, Email, or WhatsApp or any other form of social media. I strictly adhere to laws of my country. I only offer education on finance, investments on stock markets in the best possible way as much as I can through this website. Still, you must consult an authorized advisor or do thorough research before investing in any stock or derivative before trading any strategy given in this website. I am not responsible for any investment decision you take after reading any article given in this website. Knowledge is the only way to get success in stock markets. I try my best to give stock market investing and trading knowledge through the articles posted in this website. Thanks for visiting my website.