As an options trader, I am looking for movement in the stock, plain and simple. Give me a situation where the stock can give me an out-sized move up or down and I have a chance to make good coin. Not only do I need to overcome the high volatility but I also need to beat the clock (option expiration).
So, when earnings season comes around I get really pumped up, as we know there are some big moves to be seen. I’ll be looking to the chart setups to find the best chances regardless of the name and the earnings report. The chart setup, implied volatility, option volume and price action are key elements. Wouldn’t it be great to bag a Netflix, Priceline, or even a Google or Apple for a big score following earnings? YOU BET! But how do we do it safely?
There are several things to do here but it all starts with proper position sizing. Know your risk and what you’re willing to lose, and be okay with it. If you’re wrong (earnings are generally a binary result), then just move on. Next, it’s all about the technicals – for ME anyhow. Some out there may use a fundamental tool but there is clearly no way to rationalize an out-sized move with fundamentals. Option pricing for me is critical but not the most important, I want to jump on board a name that will move. I just need a chance to make money with a move.
Being right in the heart of earnings season and the BIGGEST week yet to come, give yourself a chance to make a nice score – earnings provide that sort of opportunity.
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Bob Lang has been managing private options trading accounts for clients since 2004 and providing subscribers with guidance on trading options for income at Explosive Options since 2011.
