We’re in the midst of earnings season and it’s being reported that 78% of companies in the S&P 500 have exceeded their sales estimates.
This news of “earnings beats” is adding to the already volatile market.
Earnings are one of the biggest market catalysts that we use to make money because it hits like clockwork.
Even with the uncertain market swings, I have a low risk play that will have you making money in less than 10 days.
This strategy that will allow you to add profits to your portfolio during earnings season no matter what direction the stock moves.
Get all of the details on this moneymaking play here…
Make Money During Earnings Season Using Straddles
Stocks tend to gap consistently over multiple earnings announcements – which makes potential trading opportunities easy to find.
And as traders, we want to use a low-risk strategy that will profit if the stock goes up or down.
That’s right – with options, you can profit in either direction.
- Call options profit if the underlying stock goes up with unlimited profit to upside. If the stock drops, the risk is limited to the cost.
- Put options profit if the underlying stock goes down with unlimited profit to the downside. If the stock goes up, the risk is limited to the cost of the option.
When you put them both together in a single trade, you have something that makes money no matter what direction the stock moves – and you’re doing it with limited risk.
This strategy is called a straddle.
Here’s an example from Q3 earnings reports:
On November 2, 2020, Celsius Holdings (NASDAQ: CELH) had earnings coming up in 10 days. The stock gapped all four times looking at past earnings announcements.
Here’s an example of what my scanner showed before we entered this trade.
As you can see,
CELH averaged 84.55% ROI over the past four earnings periods with 100% winners when entering 10 calendar days before earnings. It even gave us the entry and exit dates.
The stock gapped up each time, but the direction of the gap is unpredictable – which makes picking a direction with a straight call or put a bad idea.
So, on November 2, you could have bought a CELH December 18, 2020 $20 Call for $3.25 and a CELH December 18, 2020 $20 Put for $2.80.
The total cost per straddle would have been $6.05 x 100 shares controlled and a total debit of $605. The max risk in a straddle is the cost, so the max risk in this trade was $605.
Let’s take a look at the risk graph of the resulting straddle.
As you can see, if
CELH gapped up, you could make unlimited profit and the same for a gap down.
On November 12, CELH announced earnings and gapped up big providing a $668 profit, which was a 110.4% return.
The
CELH Dec 18, $20 calls shot up from $3.25 to $12.45 and the
CELH Dec 18, $20 calls dropped to $0.30. This straddle allowed us to profit on this trade while assuming very little risk.
With volatility still in the markets and COVID-19 still taking a toll on global economics, using a straddle is the ideal way to profit on earnings season.
Here are some setups that you can play right now that have 100%-win rates over the past four earnings periods:
It’s important to enter these straddles exactly the number of days indicated under the “Calendar Days Before Earnings” column.
Also, be sure to verify the earnings date shown under the “Next Earnings Date” column.
None of the stocks listed have confirmed their earnings announcement as of the writing of this article, but to confirm, check out sites like “earningswhispers.com” which will quickly indicate if earnings are confirmed.
If the confirmation date is different than the date shown in the data above, simply change your entry date such that you enter the number of “Calendar Days Before Earnings” specified.
Once you’re in, simply hold on for the ride and exit on the specific exit date.
But this isn’t the only way to profit during a volatile earnings season…
Recently, small fortunes were made in just a matter of days, thanks to a formerly little-known strategy that can grant you access to the biggest, fastest moving plays in any market.
Today, my friend and colleague Andrew Keene is letting one of Wall Street’s biggest secrets out of the bag… with it, the average American can fight back against the financial elite, laughing all the way to the bank.
For the full details, click here now.
Talk soon,
Tom Gentile
