Turn Earnings Volatility into Opportunity
July 10, 2024 | Read Online | | | | | Earnings season kicks off hot and heavy on Friday. | For a select group of traders it will create an opportunity for massive windfall profits. | However, that's not the case for the majority. | If you want to be profitable at trading earnings consistently— You Must Come Prepared. | Here's a quick cheat sheet to help you prepare: | Earnings Cheat SheetAnnouncing on July 12, 2024JPMorgan Chase (JPM)Beat Estimates 9 Times, Missed Estimates 4 Times (Last 13 Quarters) Implied Move on Earnings: 3.2% Last Earnings Report: Moved -3.6% Wells Fargo (WFC)Beat Estimates 9 Times, Missed Estimates 4 Times (Last 13 Quarters) Implied Move on Earnings: 4.7% Last Earnings Report: -1.3% Citigroup (C)Beat Estimates 10 Times, Missed Estimates 3 Times (Last 13 Quarters) Implied Move on Earnings: 3.4% Last Earnings Report: +2.6% Announcing on July 15, 2024Goldman Sachs Group (GS)Beat Estimates 9 Times, Missed Estimates 3 Times (Last 12 Quarters) Implied Move on Earnings: 4.4% Last Earnings Report: +4.5% BlackRock (BLK)Beat Estimates 11 Times, Missed Estimates 1 Times (Last 12 Quarters) Implied Move on Earnings: 3.8% Last Earnings Report: -0.05% | So what does this all mean? | It provides key information that can help predict how a stock might move when a company announces its earnings. | Let's break it down: | Announcement Dates: | The sheet shows when companies will announce their earnings. For example, JPMorgan Chase, Wells Fargo, and Citigroup are announcing on July 12, 2024, while Goldman Sachs and BlackRock are announcing on July 15, 2024. | Earnings Estimate History: | This shows how often a company has beaten or missed analysts' expectations in recent quarters. For instance, JPMorgan Chase beat estimates 9 times and missed 4 times in the last 13 quarters. This gives you an idea of how consistently a company meets or exceeds expectations. | Implied Move on Earnings: | This is an estimate of how much the stock price might move (up or down) after the earnings announcement, based on options market pricing. For example, JPMorgan Chase has an implied move of 3.2%, suggesting the market expects the stock could move about 3.2% in either direction after earnings. | Last Earnings Report Movement: | This shows how the stock price moved after the previous earnings report. For instance, JPMorgan Chase moved -3.6% after its last report, meaning the stock price dropped 3.6%. | So How Is Info Useful? | Anticipating volatility: The implied move gives you an idea of how much the stock might swing, helping you set appropriate stop losses or profit targets. Historical context: Knowing how often a company beats or misses estimates can help you gauge the likelihood of a surprise. Comparing to previous reactions: The last earnings report movement helps you understand how the market typically responds to this company's earnings. Options strategies: This information is particularly useful for options traders in setting up the right strategy. Risk management: Understanding potential moves helps in managing position sizes and overall portfolio risk.
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