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Don’t Make This Fatal Oversight During Earnings Season

Editor’s Note: Anyone who’s invested in the markets over the past few years knows that volatility is unavoidable. They also know it’s a cornucopia of opportunity. Our Freeport Society friend Jonathan Rose has been trading volatile markets for so long (over 25 years) that he’s become a master at finding and profiting from the volatility honeypot.

The man has been a bona fide market maker for many years, a floor trader at the Chicago Mercantile Exchange, and the Director of Trading at a multimillion-dollar proprietary trading firm. He’s also trained over 100 traders that went on to become professionals.

What he has to say is worth hearing, which is why I’ve been sharing his insights with you over the last few days. Today, he will show you how to profit every earnings season… one of the most lucrative times to trade volatility. 

Jonathan will have even more to say on Wednesday, May 8, at 10 a.m. Eastern, during a special Masters in Trading Summit. During that event, he will reveal the strategy he and other CBOE Exchange traders use. Reserve your spot by going here.

Till then… over to you, Jonathan.

How to Profit Every Earnings Season

Every business day, millions of people monitor the stock market … but the market itself only reflects what’s going on in the real world.

And current world events are volatile.

War in Ukraine and the Middle East… potential election chaos… persistent inflation… changing Federal Reserve policies… commodities trading… oil prices … Treasury yields…

All can move stocks and the entire market on any given day. 

But aside from the shocks that might come from the news cycle, a regular event occurs every quarter that affects investor and trader behavior – earnings season. 

This is a 10-week period that occurs four times a year when publicly traded companies issue their quarterly earnings reports.

We all know corporate earnings reports move stocks – and markets. According to the National Bureau of Economic Research (NBER), the days before and after earnings reports are released are characterized by higher than average volume and wider price swings.

Other studies show that the stock price of a soon-to-report company contains something called an “earnings announcement premium” and that stocks make some of their biggest moves – up or down – after these quarterly reports.

Naturally, this volatility makes investors nervous. 

But harnessing that volatility can pay off big for smart traders…

Why Earnings Season Is a Great Time to Trade

During my 20-year career, I’ve found that three things helped me be a great trader:

  • Flexibility,
  • Creativity, 
  • And, most important, a solid plan. 

And those qualities are never more important than when I trade during earnings season. 

When we talk about options, remember one thing — volatility rules. It’s the big boss, the critical factor that determines how much an option is really worth. 

And in my experience, most of the confusion in options trading comes from not giving volatility the spotlight it demands. That’s a fatal oversight.

When companies announce earnings, the stock price usually moves based on whether they beat or miss earnings and/or revenue estimates. For the most part, we know what to expect from an earnings per share (EPS) and revenue standpoint, but there can be big misses or big beats, depending on the situation at hand.

This latest earnings season has seen many big misses, with companies like T-Mobile U.S. Inc. (TMUS), Starbucks Corp. (SBUX), Yum! Brands Inc. (YUM) coming up short. It’s also seen some big beats, including from Pfizer Inc. (PFE), Barrick Gold Corp. (GOLD), and Expedia Group, Inc. (EXPE) to name but a few.

Companies also update quarterly and yearly forecasts during earnings, making these events important for stock-price movement to the upside and downside.

Trading options during earnings season can be extremely profitable for those who master the right strategies. Meticulous trade management with precise entry and exit points can transform a daunting gamble into a calculated risk, setting the stage for potential success.

A solid fundamental understanding of the market, the strategic use of options, and disciplined risk management forms the cornerstone of successful trading. 

My career on the front lines of the exchanges has shown that these principles, when applied systematically, can offer major advantages, even in volatile markets.

This is just one of the ways that I trade without the fear that trips up many traders. And it’s what I’m going to share with you when you join me at my Masters in Trading Summit on Wednesday, May 8, at 10 a.m. Eastern

At the summit, I will introduce a new market indicator that I believe can help transform how you approach your trading.

It’s critical for every trader to always be learning and keep an open mind to evolving strategies. This type of mindset gives us a different perspective on the markets, which helps ensure we’re in position to capitalize on market opportunities as they arise.

And as I like to say, the creative trader always wins.

Earnings season can be a great time for that creativity to shine through … and to make a lot of money too!

Trade smart, and I’ll see you Wednesday.

You can reserve your spot now – and get this on your calendar – by going here.


Jonathan Rose

Founder, Masters in Trading