Earnings Season

Next to Christmas, earnings season is the most wonderful time of the year. Unlike Christmas, earnings season comes more than once a year. It reminds me of that scene from Talladega Nights. 

​This earnings season has provided us yet with another opportunity to trade some of our favorite stocks including Microsoft ($MSFT), Netflix ($NFLX), Amazon ($AMZN) and Google ($GOOGL). I'm going to share with you a play I took on Nvidia ($NVDA). There are many other names we've taken this quarter and really, all year long and you'll see we do have our favorites but being able to back test these trades allows us to find gems that we may over look. So while we are not making a bet on earnings itself we are looking at how implied volatility over a period of time effects the option prices before an earnings event. Something we've also added has been post earnings plays. I'll show you a recent example of Advanced Micro Systems ($AMD) and how we can capitalize on moves after an earnings event.

Before we dive in, just look at this conversation in our chat with one of the traders. He sticks to six names and it's all he's traded this year. His IRA manager called and asked if he even needed them. His returns are killing the whopping 4-5% his Edward Jones guy is getting him. Talk about Wealth Management! Join the chat just to watch this guy!  

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Post Earnings

While it is fresh on my mind let's take a look at a recent post earnings play on Advanced Micro Devices ($AMD). AMD beat earnings and had over a 10% jump after earnings. I post back test results on Twitter (@FibKingTrading) but you can check out the results by CLICKING HERE. 

A few things this chart is showing me. 

1. Look at the post earnings moves 14 days after earnings. In the past year it has went up once and down three times. So why would I make a bullish bet?
2. Look at what happened last time it was up greater than 10%? It continued to climb. I'm expecting the same this time
3. So with this information on the chart, I can use it for my parameters to back test what would happen if I bought a long call, one day after earnings ONLY if the earnings has a move of 10% or greater. If you didn't click the link above to see the results, you should scroll back up and do so. 

So the chart gives us clues and back tested data so let's take the trade. I posted my trade and you can see my entry and the exit. I still have a contract remaining with a stop at $1.50. That's a total risk of $600 and reward of $605 if I were to get stopped out of the 1 remaining contract. 

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NVDA Pre Earnings

There are specific times that we like to take our pre-earnings trades. We have back tested several time periods and some work better than others and we have it narrowed down to certain stocks and what works best in part to our wonderful community of traders. One of the names we like is $NVDA and looking at an earnings run 21 days prior to earnings. I've shared the back tested data on Twitter and you can find it by CLICKING HERE. Beyond just that data we also need to look at the chart. 

The chart and the particular tool I'm using (free to members) shows us a lot of details. In the last two years (based on the back testing data we used) the stock has moved up six times 21 days prior to earnings. Average move of around 5%. Only twice did it go down. Well the back testing results were anywhere from 6-2, 7-1 and 8-0 depending on which delta you bought. For this particular trade we took in 30 and 40 deltas and now we wait! 

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