October 9th is the earnings release date for Alcoa, Inc. This is considered to be the official start of the earnings season. This earnings season may be less impactful than past ones due to the upcoming Presidential Election. Regardless of the earnings impact on the markets, one of the core concepts we teach at Online Trading Academy is the preservation of capital and the proper assessment of risk for any trade. The purpose of this article is not to teach you how to trade before an earning release, that is extremely risky and is akin to gambling. No, I am writing this article to explain some of the actions you see after the earnings are released and the reasons behind the moves. Should you attempt to trade the earnings, it is much wiser to do so after the release and during the open hours of the market.
Earnings announcements, as we know are a company’s statement of how they performed over the last quarter. The number you typically see released is the Earnings Per Share or EPS. The EPS is simply the net income of the company, minus any dividends to be paid on preferred stock, divided by the number of outstanding shares. For example, Alcoa earned $71,000,000 in the last 12 months after dividends. If we divide the earnings by the outstanding shares of 1,067,000,000 we see that the EPS was… Continue Reading
