How I Fixed the Earnings Trade Problem
Most traders make the same mistake when it comes to trading options on earnings reports.
If you’re right, you stand to make a sizeable profit.
But if you’re wrong, you can quickly lose everything…
Imagine you buy a call option on a stock ahead of earnings, thinking the company will beat earnings estimates and rally the next day.
The market closes, the CEO joins the call, and reports that revenue, profits, monthly active users — whatever metric people want to see — are through the roof.
You’re ecstatic. The stock is up 5% post-market, and your call option is a triple… in a matter of moments.
But then the CFO, a big part of the company’s turnaround, announces he’s leaving at the end of the month.
Suddenly, you’re powerless until the next trading day, where the stock opens down 5% and your option has lost almost all of its value.
Make no mistake: Trading options before earnings is a gamble.
But there’s one thing you can start doing differently, right now, to put the odds more in your favor.
The Most Important Event and the Right Way to Trade It
I’ve fallen victim to the earnings report gamble a few times myself.
But once I realized what was wrong, I made it my mission to come up with a better way.
Now, I follow two key principles before I trade earnings:
Don’t try to guess what will happen before the report.
Don’t trade on just any old company.
Easier said than done — until I put the finishing touches on my Profit Calendar, that is.
This Profit Calendar uses decades of data to cut out 99% of the stocks in the market reporting earnings.
Why do we cut out so much?
Because of a little-known effect that I like to call the Earnings Boost.
This provable edge only occurs in a rare handful of stocks — and can send them skyward in the weeks and months following an earnings report.
Despite this, I doubt even 1% of individual investors know it exists.
In fact, I know it — because I still see traders betting the farm on a single-day spike with little chance of working out.
There’s no guesswork involved with our approach.
We simply wait for the report to come out, see if it triggers our Earnings Boost signal, and get in position to profit.
Using this strategy, we’ve spotted options that went up 526% in a few months, 465% in eight weeks, and even 438% in just five days.
We aren’t subject to the broad market’s swings. It all comes down to the individual company, its history, and my signal.
That’s the power of the Earnings Boost strategy.
Now, let me show you exactly how it works…
How the Earnings Boost Trumps the Gambler’s Approach
One of the companies on my Profit Calendar is construction company Caterpillar (CAT). It has a history of making big moves when my Earnings Boost signal hits.
The Calendar told me to watch Caterpillar’s earnings report back on October 24, 2017.
Sure enough, that morning, CAT’s stock popped over 5%. That was enough to trigger my Earnings Boost signal.
Since 2006, CAT had experienced an Earnings Boost seven times. And 71% of the time, this stock continued to climb — making it one of my strategy’s top-performing stocks.
So, I told my subscribers to buy the CAT $140 January 19, 2018 calls for about $4.64 per contract, or $464.
And then, just as I expected, CAT went on a big rally…
By early December, CAT had posted a sizeable return — but we still had a lot of time left on the option.
I wrote my subscribers and told them to close out half their option position for a 50% gain.
But the biggest gains were just around the corner…
In less than three months, the stock went up another 23%.
I made the call to close the position for a 526% gain.
(Click here to view larger image.)
Overall, this turned every $5,000 into $19,400. A phenomenal result.
But we could’ve done even better.
Notice how we sold half our position at 50%?
I used to recommend this all the time to lock in gains.
But after trades like this, it was clear we were leaving money on the table.
If we were going to secure the best possible gains from the Earnings Boost strategy, we had to accept a little more risk and let these winners run.
Take a look at this example…
In early July of 2021, the market was digesting Nike’s (NKE) huge beat on its earnings report. The stock spiked 10% the day after its earnings report in June.
And based on my historical data, NKE moved higher in the next month and a half after an earnings boost 80% of the time.
This was more than enough to trigger my Earnings Boost signal.
So, two weeks later, on a down day for NKE, we got in. We bought the NKE August 20, 2021 $160 calls for $4.96 per contract, or $496.
And then, less than a month later, NKE was up another 6%. And we were able to close out our call options for a 129% gain.
(Click here to view larger image.)
More than doubling your money in less than a month, just by betting on a trade with an 80% win rate… It doesn’t get much better than that!
The Strategy You Need, Each Earnings Season
I wouldn’t suggest trading earnings season without this Profit Calendar, and my Earnings Boost signal, ever again.
There’s just too much needless risk in trying to trade options beforehand.
And I was so sick of seeing new traders get blown up by earnings reports, I knew I had to come forward with it.
That’s why your publisher Chris Cimorelli and I just recently sat down to explain how these tools work in detail.
I revealed the specifics of how to access my Earnings Boost signal and the Profit Calendar at the best offer we’ve ever put together.
If you haven’t already, click here now to check out my brand-new presentation. And don’t wait — it’s coming offline later this week.
Chad Shoop, CMT
Editor, Quick Hit Profits