This is really bizarre for me, but the thought occurred to ask you, my readers, about how you play earnings season and compile a story on it. Many of you who have read my musings for a while, know that I trust what is given to me to write; but I sat on this one for hours thinking surely something else will reveal itself for me to write about. So I waited, and nada, nothing, blank. So, as always, I succumb to the muses and ask. I hope you're replies will not be nada, nothing or blank. Thanks in advance.
Do you have an earnings season plan? How early do you start it? If not, how do you play the earnings game?
Happy Trading, Living and Dancing
Today's BlogPick --- VNO
©DayTrading with Anni 2010
"Do you have an earnings season plan?"
Jeff Augen wrote a book on the subject: "The Volatility Edge in Option Trading". A technical slog, but the basic idea is that there is a strong tendency for volatility to pop in the week just before earnings, thus driving up prices and in particular for options. Given the dominant big-money computerized trading going on, the tape seems to be a lot different that it was a few years ago, so this pattern of behavior is not quite as reliable and the price behaviors after earnings have been a bit wild to say the least.... But it can work.
My technique. Wait and see what everybody else is doing. I know that sounds ridiculous, but I don't have time to look at fundamentals. And, what is reported on CNBC as good news, can be totally the opposite of how the stock responds. Or, vice cersa. So, I watch the market results and go with the trend. If there's a gap up/down, I look for the pullback or reversal knowing it usually comes. If it's flat, I don't trade it at all. I'm not an analyst and there's an awful lot of info they look at that we usually can't decifer, so it's, as usual, technical indicators that I use to trade.
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