Earnings season is really ramping up this week, which means owning stock and options positions is risky, but could also yield big rewards. And with Amazon (AMZN), Intel (INTC) and Starbucks (SBUX) reporting tonight the earnings season fireworks are almost surely going to make or break some of these stocks for weeks and months to come.
So how do I prepare for earnings? I research like crazy! Every day during earnings season, I send my Cabot Options Trader/Cabot Options Trader Pro subscribers my research, and what the options market is forecasting for companies reporting that night and the next morning.
For example, every earnings report I send to my subscribers describes what the options market is predicting in terms of price movement, summarizes previous earnings moves, describes how hedge funds are positioning for earnings and presents my thoughts on all of it.
And here is a very small sample of what I will send my subscribers later this morning ahead of AMZN, INTC and SBUX earnings reports. (To get the full write-ups on these stocks ahead of earnings, or to learn more about Cabot Options Trader, click here.)
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Once considered a niche segment of the investing world, options trading has now gone mainstream.
With little knowledge on the best strategies, you can use options to rig the odds in your favor and make trades that have up to an 80% probability of success. Find out how in this free report, How Options Work—and How to Hedge Portfolios with Options.Read Your Free Report Here.
What the Options Market is Saying about these Three Earnings Reports
(prices as of Wednesday morning)
Amazon (AMZN) earnings tonight after the close.
With the stock trading at 1,925, the options market is pricing in a move of $81, or 1,844 to the downside and 2,006 to the upside.
Last earnings cycle, AMZN fell from 1,719 to 1,626 on earnings.
4/22 – Buyer of 500 May 1,930 Calls for $24.15 – Stock at 1850
Intel (INTC) earnings tonight after the close.
With the stock trading at 59, the options market is pricing in a move of $2.50, or 56.5 to the downside and 61.5 to the upside.
Last earnings cycle, INTC fell from 49.75 to 47 on earnings.
4/23 – Buyer of 2,000 June 60 Calls (exp. 2020) for $5.87 – Stock at 58.75
Starbucks (SBUX) earnings today after the close.
With the stock trading at 76, the options market is pricing in a move of $3, or 73 to the downside and 79 to the upside.
Last earnings cycle, SBUX rose from 64.75 to 67 on earnings.
4/9 – Buyer of 5,000 June 75/80 Bull Call Spreads for $2 – Stock at 75
Big Earnings Week on Tap
In the days to come, I’ll send my subscribers earnings write-ups on General Electric (GE), Shopify (SHOP), Advanced Micro Devices (AMD) and Merck (MRK), which are all reporting later next week. And in the days/weeks to come, I will write up much larger reports on stocks that Cabot Growth Investor and Cabot Stock of the Week subscribers hold positions in, such as Twilio (TWLO) and many readers’ favorite, Apple (AAPL). My write-ups will include earnings trade ideas and ways to hedge long stock positions.
And if one of your stocks (or a stock you’re waiting to buy) blows up this earnings season, keep in mind my “Three Day Rule,” a rule that I learned on the old trading floor that warns against buying immediately after an earnings miss. Here’s a link to a piece I wrote on The Three Day Rule a couple years ago.
Big picture, my takeaway for earnings season is like my overall plan for trading: Work and research hard, execute trades you believe in, and over time, the many winners will far outweigh the occasional earnings blowup.
Jacob Mintz is a professional options trader and Chief Analyst of Cabot Options Trader. He uses calls, puts and covered calls to guide investors to quick profits while always controlling risk. Beginners and experts alike can gain from following Jacob’s advice.Learn More