You’re Going to Want to Take Advantage of This (Part 1)…

We’re just about there…

That’s right, it’s earnings season!

Over the next few weeks, financial media will become a battleground for attention as companies start to announce earnings.

So how about some trading strategies to take advantage of it all?

How many times have you found yourself thinking that a stock is getting ready for a big move — and an earnings announcement could be the price catalyst?

What if I told you there was a strategy that can position you for both a breakout or breakdown move with limited risk?

Not to mention how simple and low-cost this strategy is…

Sounds too good to be true?

It’s real. And I use it all the time! I call it the pre-earnings options strategy.

It’s in two parts that I’ll go over in two separate issues.

Here’s how part 1 works…

Part I: Before the earning announcement

An earnings announcement surprise can trigger a large directional stock breakout either up or down, we all know this…

But you can position for a BIG price move with an options straddle where you buy a call AND a put before the earnings statement.

Buying the near-term options straddle will price in risk with higher volatility and therefore, a relatively higher cost in the options.

The trick here is to buy more time until expiration…

A Minimum of 60 days is needed for the specific event. This is so that the exit of the losing side can salvage a decent premium.

Then you can manage your option in the breakout direction to maximize the follow-through price trend.

That’s your pre-earnings announcement strategy!

Be sure to keep an eye out, because on Monday I’ll show you a trick you can use after the announcement has moved a stock…

Keep it In the Money,

Alan Knuckman

Alan Knuckman
Editor, In-The-Money

Trading Tip of the Day: The Nasdaq Attack… 

Greg Guenthner

This week has been all about the Nasdaq so far…

I mentioned earlier that the tech-heavy average had been lagging a bit behind the S&P and Dow in terms of year-to-date gains, but now it’s about a percent away from all time highs.

There’s even a chance we hit that target today depending on where we close this afternoon.

April has already seen plenty of bullish activity and we’re barely 10 days in… If the Nasdaq can hold onto a breakout above its highs I’m thinking we can see plenty more upside as the month progresses.

So how should you use this information to bolster your portfolio?

Well for starters, it’s a great time to swing trade.

The great part about swing trading is that you can pivot at the drop of a hat…

You’re not tied into a long term play so you can book your gains quickly and often, then reinvest that cash to do it again.

Now, it can be somewhat difficult to pick the strongest stocks when most of them are moving higher. But with a little effort you can develop a manageable list of stocks to watch and trade when you see a breakout forming.

Last piece of advice, keep it simple! Simplicity is often the key to success with strategies like this.

Happy trading!

— Greg Guenthner

You May Also Be Interested In:

Next Stop: $40 Oil?!?

You can see the stability in oil since the May contracts’ infamous run into negative territory. Crude is up an astounding 300% since bottoming out in April! Buying when there was blood in the streets has handed opportunistic traders impressive gains this month!

Alan Knuckman

Alan hails from the home of options trading in Chicago, where he began working as a clerk on the floor of the Chicago Board of Trade (CBOT). Beginning with his days on the floor, Alan’s worked with all aspects of the options markets for the past 25+ years.

Transitioning from a clerk to a floor...

View More By Alan Knuckman