ALCOA (AA), is actually the bell weather sign that profits are upon us again. AA is the very first major component of the DOW to report and it really is the unofficial signal that the earnings cycle has begun. The fact is that earnings never stop.
While the numbers may dwindle to a trickle at times, you will find companies reporting continuously. But now we will see a swell of day-to-day reporting that builds to as many as 3-400 per day in 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 businesses you know will report over the next 3 weeks.
The reporting excitement has an overall effect on the market. While firms can benefit from reporting great info while everybody is watching, the earnings cycle can also work against them if they get caught up in a list of 300 businesses reporting on that day.
Also a couple high profile businesses can influence the market for a few days. Others will be swept along with the momentum regardless 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 throughout the earnings season:
First - determine what day your business is going to report.. The very best method to verify would be to call the company investor relations department.
Second - Time of day is very important to traders. The young man couldn't tell me what time of the day the information could be released. This is quite common for a business to have a standing policy for their release time, however it is not guaranteed
Third - Play or No Play. If you do not have experience playing earnings you must do some learning and practicing. You will find specific earnings plays that will work well. Guessing isn't an excellent one.
4th - History. The history of the stock may be extremely valuable.
Fifth - Option Pricing. The price of options may be a major tip off. High volatility may produce huge time premium which typically gets reduced dramatically once the earnings come out.
6th - Time of the month. It may be fine to enter a trade by buying a Call or Put even if there is only a week left until expiration in the event you will only be in it for a couple of days.
Seventh - Tactics. The riskiest and most profitable earnings play would be the one sided Long Call or Put. Once again, it is a crap shoot and should be played with Very disposable cash. Most frequently some sort of combination play such as a Strangle or Straddle is employed.
So, please have fun during earnings season, but be mindful. Know where your skill level is just before you put money into trades. Do not be afraid to play earnings. You will not learn as very much or as quick on the sidelines and you don't have to put very much money in the trades to practice in real time.
You need to practice perfectly and that means get trained properly. The most valuable advice may be obtained from an experienced investment consultant. To look for the most reliable investment expert search: [shell company], public mergers, or merger companies. Don't forget, practice makes perfect!
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