Earnings season brings with it the vision for the next $GOOGL $.10 to $100 move.
Even last weeks $AXP, $GOOGL, $AMZN, $SKX earnings reports were very profitable for those who got the moves right via out of the money options.
While research, charts, and experience can get you in an earnings trade there is no way to know with 100% certainty.......
- What exactly the company will report
- and more importantly - how the market will react to that report
The bottom line: It's easy to be wrong.
How many times have we seen a company report terrible numbers only to see the stock trade as if the company has reported numbers that far exceeded expectations.. and vice versa. A company reports a blow out quarter and sees its stock plummet in response.
The great thing about trading stock options is that if you aren't sure about the direction a stock will trade, but you have a good idea that it will make a big move, you can buy both calls and puts. Heads you win, tails they lose! Of course if the stock trades flat post earnings the coin will land precisely on its side and you will lose on both trades.
Earnings trades are an educated coin flip. Anyone who tells you differently is wrong. No one knows where a stock is headed once the company reports earnings, but as the time frame moves out price prediction can be a little less dicey.
Trading short term, trading earnings moves, trading events, leave you more vulnerable to being wrong in this market. Which is why high risk, short term trades should be handled with care. With the potential for a big earnings move or a seeing your entire trade get blown out of the water, earnings trades should be the smallest option trade you make.