Earnings Release

[cpatte7372]

Hi,

I wonder if someone could educate on how professionals make money on earnings release? I'm aware if a company like microsoft, cisco or GE issue an earnings release the information may move the markets.

I would like to know how you guys profit from earnings release.

Cheers

Carlton

[gspiker]

Carlton,


All of this is IMO only...

Playing stocks over earning is a dangerous thing. I know of people who thought they had a lock on it, only to get burned in the end. Even if you think you have inside info on the announcement, you have to know if the street thinks that number is good or bad. And the streets view isn't based on the Estimate EPS that you can find on many sites. I'm talking the unspoken opinion of the street that they have voted on by buying or selling the stock.

If you really wanted to play earnings, the safest way may be to take a straddle position using options and hope for a big move due to the announcement. This could work against you if the stock really doesn't react much at all.

Personally, unless its a long term holding (of which I have none right now) I wouldn't hold over earnings.

G

[FibbGann]

Wait for the announcement, let the craziness settle and play the chart. I would not advise this for anyone though, because there can always be following statemnets that can flip the interest.

Bottom line, don't even worry about it, because it is not worth the risk unless one is up to the challenge and many are not.

[cpatte7372]

Guys,

Thanks for the feedback. However, I'm not sure if I made myself clear. The only way I can explain myself is through an example.

Proctor and Gamble (PG) recently announced very good price earnings. As a result, shares in stocks in its respective industry (House hold products) appreciated. Now, if you knew that such a big player like PG were going to issue an earnings release you could have selected a number of stocks in its industry and take advantage its increase. I agree that the selection of the stocks in Household products should not be chosen soley on the basis that PG is issuing a price earnings report but on other technical/fundamental factors. At least this way, you know - for better or worse - that something is going to happen to the Household Products after PG has made its announcement.

I recently read in a CBSMarketWatch article that in the short-term markets are be moved by products rather economic factors.

I guess I'm looking at ways to profit in the short-term until the markets really start to pick up.

Again, I would really appreciate your comments.

Cheers

[FibbGann]

Cpatte, I would say scalp for now, this market is relentless and brutal to most. This is why i have stoped making calls temporarily for swings and so on.

I am only making calls live to those who I am training and no positions are held over night.

I personally love this market the way it is! In time it will make up its mind though, just be patient.

As far as the PG example there are a few ways to play it.

You can find the stock that correlates to it the best and do a counter position (hedge) as Gspiker explained.

or

Wait for the earnings and know what stocks will move in sympathy of that play, then target them.

P.S. Don't beleive everything you read.

[gspiker]

The "sympathy play" (playing stocks you expect to move in sympathy of news from a main stock) has the same draw backs as playing the announcing stock.

But let's say you have a belief that house hold products are going to do well...you could plunk money down on the major players in that space and sometime before the earnings announcement sell. This works well in a bull market when earnings runs happen all the time. It is not recommended for non-trending or down trending markets (though the opposite can work well in down trending markets - sell ones who you think will do badly and cover before earnings).

-G