ALCOA (AA), is the bell weather sign that earnings are upon us again. AA is the very first major part of the DOW to report and it's the unofficial signal that the earnings cycle has begun. The truth is that earnings doesn't stop.
While the numbers may possibly dwindle to a trickle at times, there are companies reporting constantly. But now we will see a swell of day-to-day reporting that builds to as much as 3-400 per day within the next two weeks.
Then it'll peak and drop off once again sharply. Not all exciting firms report during this time. In general, most of the firms you know will report over the next three weeks.
The reporting excitement has an overall effect on the market. While organizations can benefit from reporting very good info while everybody is watching, the earnings cycle may also work against them should they get caught up in a list of 300 firms reporting that day.
Also a couple high profile companies can influence the market for a few days. Others will probably be swept along with the momentum no matter what their earnings had been. It's difficult to report very good news on a bad day.
So, some ideas on how you can play the market during the earnings season:
First - find out what day your business is going to report.. The most effective method to verify would be to contact the company investor relations department.
2nd - Time of day is very critical to traders. The young man could not tell me what time of the day the data could be released. This is quite common for a firm to have a standing policy for their release time, however it is not guaranteed
3rd - Play or No Play. If you don't have experience playing earnings you need to do some learning and practicing. There are specific earnings plays that may work well. Guessing just isn't a great one.
4th - History. The history of the stock will be quite valuable.
Fifth - Option Pricing. The price of options might be a big tip off. High volatility can produce huge time premium which usually gets decreased dramatically as soon as the earnings come out.
6th - Time of the month. It could be fine to enter a trade by purchasing a Call or Put even if there is only a week left until expiration in case you will only be in it for one or two days.
Seventh - Techniques. The riskiest and best profitable earnings play may be the one sided Long Call or Put. Once again, it really is a crap shoot and ought to be played with Very disposable money. Most often some sort of combination play such as a Strangle or Straddle is utilized.
So, please have fun throughout earnings season, but be cautious. Know where your skill level is just before you put revenue into trades. Don't be afraid to play earnings. You will not understand as much or as fast on the sidelines and you don't need to put very much money in the trades to practice in real time.
You need to practice perfectly which means get trained correctly. The most valuable guidance can be obtained from an experienced investment consultant. To locate the most reliable investment specialist search: [shell company], public mergers, or merger companies. Don't forget, practice makes perfect!
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