Tax Season is Here! Save 15% on H&R Block Online
iconAll times are GMT -4. The time now is 09:56 AM. | Search:

» StockRants Stock Forum » Public Stock Forums » Trend Spotting » Earnings Season: Know When To Hold Em, Know When To Fold Em



Reply
 
Thread Tools Search this Thread
Old 08-08-2017, 12:06 PM   Nav to Top  #1
inthemoneystocks
Trader
 
inthemoneystocks's Avatar
 
Join Date: Jan 2010
Location: NYC
Posts: 74
Favorites: spy,fax,xom
Rep Power: 96
Reputation: 37
inthemoneystocks is on a distinguished road
Default Earnings Season: Know When To Hold Em, Know When To Fold Em

It's earnings season! This is when corporations will report their quarterly results and usually issue future guidance for the company. This is also a period when stocks will often have big price swings after the earning announcement. For many traders and investors it can be an exciting time to trade, but danger lurks when market participants hold stocks into an earnings announcement.

Just yesterday, I closed out a long trade in Dean Foods Co (NYSE:DF) at $14.99 a share. The reason I exited the position was because the company was scheduled to report earnings this morning before the opening bell. Unfortunately for me I lost 0.11 cents on the Dean Foods trade as my entry was $15.10. I know, nobody likes to take losses on trades, but sometimes that is the best move to make ahead of an earnings announcement. If you take a look at the reaction today in Dean Foods Co today after earnings it is not pretty. In fact, DF stock is trading lower by $2.80 to $12.17 a share today after reporting earnings. Believe it or not, this is a decline of nearly 19.0 percent on the day. Now my 0.11 cent loss looks like a victory after this terrible reaction to the Dean Foods Co earnings report.

Now to be fair, sometimes stocks can rocket higher after earnings reports. Many traders will often celebrate with excitement if they hold a stock and are on the right side of the earnings reaction. Just think how I would feel if Dean Foods Co was trading higher by $3.00 after I sold it yesterday, probably not very good. After trading for so many years I have realized that trading earnings is very much like gambling, the odds are simply not in my favor to make that bet. So I have accepted the fact that holding stocks into earnings is extremely risky and simply not my style of trading.

If you do decide to hold a stock into an earnings announcement it is best to hold a low beta stock. A low beta stock is an equity that is less volatile, will historically move in a smaller and tighter range. Earlier this earnings season I held Bank of America (NYSE:BAC) into earnings. The stock traded down about 0.30 cents before ultimately recovering and making new highs. BAC stock is a low beta equity and I was actually in the money on the trade before earnings, so there was not a lot of risk of a major decline. Either way, holding stocks into earnings is extremely risky, every trader and investor should understand the odds are no longer in your favor ahead of a corporate earnings report.




Nicholas Santiago
InTheMoneyStocks
inthemoneystocks is offline   Rate this post Yes | No Reply With Quote
Reply

Similar Threads
Thread Thread Starter Forum Replies Last Post
Strong Buy: Strong Buys for the Holiday Season StockRanger US Stock Picks 2 12-27-2016 01:17 AM
Watch: In Honor of Football Season, Companies Behind the NFL Vinnystocktips US Stock Picks 0 09-08-2011 09:43 PM
Watch: In Honor of Football Season Being Here Vinnystocktips US Stock Picks 0 09-03-2011 09:21 PM
Stem Stocks: Will They Own the Summer Season? Kyle Rumors & News 2 06-21-2009 11:29 PM


Thread Tools Search this Thread
Search this Thread:

Advanced Search

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is On