Recommendations At The Best Way To Play The Market During Earnings Season
ALCOA (AA), is actually the bell weather sign that earnings are upon us once more. AA is the first major component of the DOW to report and it is the unofficial signal that the earnings cycle has begun. The fact is that earnings doesn't stop.
While the numbers may dwindle to a trickle at times, there are companies reporting continuously. But now we will see a swell of daily reporting that builds to as many as 3-400 per day over the next two weeks.
Then it'll peak and drop off again sharply. Not all exciting businesses report during this time. In general, most of the companies you know will report over the next three weeks.
The reporting excitement possesses an overall effect on the market. While companies can benefit from reporting great information while everybody is watching, the earnings cycle can also work against them should they get caught up in a list of 300 companies reporting that day.
Also a couple high profile organizations can influence the market for a day or two. Others will be swept along with the momentum regardless of what their earnings had been. It's tough to report great news on a bad day.
So, some ideas on how to play the market during the earnings season:
First - determine what day your company is going to report.. The very best way to verify would be to call the company investor relations department.
2nd - Time of day is very important to traders. The young man could not tell me what time of the day the information would be released. This is quite common for a business to have a standing policy for release time, however it is not guaranteed
Third - Play or No Play. If you don't have experience playing earnings you must do some learning and practicing. There are particular earnings plays that can work well. Guessing isn't a good one.
4th - History. The history of the stock can be really valuable.
Fifth - Option Pricing. The price of options can be a big tip off. High volatility may produce huge time premium which often gets reduced dramatically after the earnings come out.
6th - Time of the month. It may be fine to enter a trade by purchasing a Call or Put even if there is only a week left until expiration if you will only be in it for one or two days.
7th - Strategies. The riskiest and most profitable earnings play is the one sided Long Call or Put. Once again, it is a crap shoot and should be played with Very disposable cash. Most often some sort of combination play like a Strangle or Straddle is used.
So, please have fun during earnings season, but be careful. Know where your skill level is just before you put money into trades. Don't be afraid to play earnings. You will not learn as much or as quick on the sidelines and you do not have to put very much money into the trades to practice in real time.
You need to practice perfectly and that means get trained correctly. The most valuable advice can be obtained from a skilled investment consultant. To find the most reliable investment expert search: shell company, public mergers, or merger companies. Don't forget, practice makes perfect!
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