Share This Article

Facebook LinkedIn
Twitter Reddit
Print Email
Pinterest Gmail
Yahoo
Money Morning
×
  • Invest
    • Best Stocks to Buy
    • Stock Forecasts
    • Stocks to Sell Now
    • Stock Market Predictions
    • Technology Stocks
    • Best REITs to Buy Now
    • IPO Stocks
    • Penny Stocks
    • Dividend Stocks
    • Cryptocurrencies
    • Cannabis Investing
    • Angel Investing
  • Trade
    • How to Trade Options
    • Best Trades to Make Now
    • Options Trading Strategies
    • Weekly Trade Recommendations
  • Retire
    • Income Investing Guide
    • Retirement Articles
  • More
    • Money Morning LIVE
    • Special Investing Reports
    • Our ELetters
    • Our Premium Services
    • Videos
    • Meet Our Experts
    • Profit Academy
Login My Member Benefits Archives Research Your Team About Us FAQ
  • Invest
    • Best Stocks to Buy
    • Stock Forecasts
    • Stocks to Sell Now
    • Stock Market Predictions
    • Technology Stocks
    • Best REITs to Buy Now
    • IPO Stocks
    • Penny Stocks
    • Dividend Stocks
    • Cryptocurrencies
    • Cannabis Investing
    • Angel Investing
    ×
  • Trade
    • How to Trade Options
    • Best Trades to Make Now
    • Options Trading Strategies
    • Weekly Trade Recommendations
    ×
  • Retire
    • Income Investing Guide
    • Retirement Articles
    ×
  • More
    • Money Morning LIVE
    • Special Investing Reports
    • Our ELetters
    • Our Premium Services
    • Videos
    • Meet Our Experts
    • Profit Academy
    ×
  • Subscribe
Enter stock ticker or keyword
×
5 Ways to Beat the Fed (and Crush Inflation)

Email this Article

Send with mail | ahoo instead.
Required Needs to be a valid email
Required Needs to be a valid email
Two Earnings Season Trades to Make Before July 23
https://moneymorning.com/?p=1183108
Required Please enter the correct value.
Twitter
Stocks: ZTS

Two Earnings Season Trades to Make Before July 23

By Tom Gentile, America's No. 1 Pattern Trader, Money Morning • @powerproftrades • July 21, 2021

Start the conversation

Comment on This Story Click here to cancel reply.

Or to contact Money Morning Customer Service, click here.

Your email address will not be published. Required fields are marked *

Some HTML is OK

Tom GentileTom Gentile

Every single listed company out there has to update the market on its earnings every quarter. That's earnings season to you and me, and I think it's the most wonderful time of the year. Good thing it happens four times a year.

Millions of investors - and, more importantly, tens of thousands of analysts - go over these releases with a fine-toothed comb, and the teensiest over- or under-performance can spark big gaps up or down in the stock's price.

We've all seen stock charts before. When the market's humming along as usual, there's a fairly smooth price pattern that goes up and down, up and down; it can take days or weeks of trading for a trend to appear and play itself out.

But a gap is a spot on a stock price chart where the price moves sharply up or down in one session with little or no trading in between. The chart will then show a "gap" in the usual price pattern.

Stocks gap at earnings all the time, but what you might not know is regular traders can use these gaps to take down big profits - big, reliable profits - virtually like clockwork.

There are two earnings reports coming up on stocks that have a long history of making these profitable gaps. I've done the legwork here, so I'll run you through what's happening and list the trades to make...

Some Stocks Have a History of Earnings Gaps - That's Key

Take a look at these three charts of famous stocks that consistently gap at earnings - the green "E" triangles are earnings events.

History tends to repeat, so with a historical earnings gap record, it's likely that these stocks will gap at their next earnings announcement.

The icing on the cake is that these consistent gaps create an even more reliable pattern. One component of an option's value is implied volatility (IV). IV is the expense of options and as earnings approaches, the option IV of gapping stocks surges, sometimes in a big way. This means that options bought prior to earnings will be more expensive - sometimes way more expensive - at earnings. That's money you can pocket.

Check out the IV charts for the gapping stocks above:

As you can see, the IV "surges," rising into earnings each time. Just as importantly, IV tanks immediately after earnings. The pros call this "IV crush."

Now, I can't overstate this or say it enough: IV crush is critically important because if you hold options over the earnings announcement, you'll get hammered when the options get suddenly waaaaay cheaper.

So, with these two consistent patterns, we can come up with option trades that are profitable based on stock movement AND IV rush. It's like a one-two profit punch!

Options Trading Guide

There's a surprising secret that separates trading masters from the folks fighting over Wall Street's table scraps.

Learn More

Options Trading Guide

There's a surprising secret that separates trading masters from the folks fighting over Wall Street's table scraps.

Learn More

Here's the Safest Way to Make the Trade

There are various ways to do this, but over the decades I've spent trading, I've developed a "favorite" way that generates the biggest profits:

  • Find stocks that move consistently up or down into earnings;
  • Buy a call or put to match the direction;
  • Ride the surge;
  • Get out before the earnings announcement to avoid IV crush.

Here's an example of a trade on CSX Corp. (NYSE: CSX), an American railroad company.

This is the stock and options IV chart as it appeared six days before earnings, on Jan. 10, 2020:

Notice two things:

  • CSX gaps at earnings (green "E" triangles).
  • The IV surges higher into earnings (and tanks in an IV crush right after).

We bought a CSX Jan. 17, 2020 $74 call option for $1.30.

Six days later, just before the earnings announcement, here's what the chart looked like:

As you can see, both the stock and the IV went up. That's a perfect cue to exit, so on the exit date, the CSX Jan. 17, 2020 $74 call option we bought for $1.30 was worth a whopping $3.45, a 165% profit in six days.

Two IV "Surge Strike" Earnings Plays for This July

Finding these kinds of setups is like shooting fish in a barrel when you have scanners and - whaddya know - I have them. My scanner finds these patterns and determines the optimal day to enter to maximize profits.

Two popped up on my screen that I'll share right now. Remember, at-the-money (ATM) means the strike price closest to the current stock price.

Zoetis Inc. (NYSE: ZTS) is an American pet and livestock drug company reporting earnings on Aug. 5, 2021, before market open (BMO). Zoetis sports a 221.62% average return on investment (ROI) over the past four earnings periods.

ZTS stock is currently trading at $199. Buy an at-the-money (ATM) ZTS call on July 22, 2021. Select an ATM call with an Aug. 20, 2021 expiration. Exit the trade no matter what on Aug. 4, 2021, the day before Zoetis reports.

Calix Inc. (NASDAQ: CALX) is a Cloud computing firm out of Petaluma, Calif., reporting earnings on July 26, 2021, after market close (AMC). Calix boasts a 60.31% return on investment over the past four earnings periods.

CALX shares are currently trading at $43.73. Buy an at-the-money CALX call on July 21, 2021. Select an ATM call with an Aug. 20, 2021 expiration. Exit the trade come what may before the market closes on July 26, 2021.

"Surge Strike" Profit Opportunities Happen All the Time

I think you'll be really impressed with the profits you bank on these two earnings-season "surge strike" trades. I publish trades like this all the time in my Operation Surge Strike research service. Thanks to the "Millennial Market Takeover" - millions of new traders and $970 billion splashing around the markets every trading day - earnings season isn't the only opportunity to make these potentially lucrative trades.

See, not long ago, I looked out at the millions of "risk-on" amateur, speculative traders out there - blindly throwing darts at stocks, but generating massive volume - and realized what an incredible opportunity the situation was handing savvy traders.

I turned my brute-force "BRUTUS" algorithm loose on the mountain of data this crazy market action was generating. I did some back-testing, and sure enough, BRUTUS helped me uncover massive opportunities for 300% returns in three days... 650% in eight days... even 2,500% in 16 days during the back-testing period! With $970 billion changing hands every day, this isn't letting up anytime soon. You can go right here to learn about BRUTUS and Operation Surge Strike - my next recommendation drops soon.

Follow Money Morning on Facebook and Twitter.

Join the conversation. Click here to jump to comments…

Tom GentileTom Gentile

About the Author

Browse Tom's articles | View Tom's research services

Tom Gentile, options trading specialist for Money Map Press, is widely known as America's No. 1 Pattern Trader thanks to his nearly 30 years of experience spotting lucrative patterns in options trading. Tom has taught over 300,000 traders his option trading secrets in a variety of settings, including seminars and workshops. He's also a bestselling author of eight books and training courses.

… Read full bio

Login
guest
guest
0 Comments
Inline Feedbacks
View all comments
LIVE
Visit Money Morning Live


Latest News

January 19, 2023 • By Money Morning Stock Research Team

These Stocks Could Go To $0

January 9, 2023 • By Money Morning Stock Research Team

The Government Is Pouring $391 Billion Into These Stocks - Buy Now

December 27, 2022 • By Money Morning Staff Reports

6 IPOs in 2023 You Can’t Afford to Miss
Trending Stories
ABOUT MONEY MORNING

Money Morning gives you access to a team of market experts with more than 250 years of combined investing experience – for free. Our experts – who have appeared on FOXBusiness, CNBC, NPR, and BloombergTV – deliver daily investing tips and stock picks, provide analysis with actions to take, and answer your biggest market questions. Our goal is to help our millions of e-newsletter subscribers and Moneymorning.com visitors become smarter, more confident investors.

QUICK LINKS
About Us COVID-19 Announcements How Money Morning Works FAQs Contact Us Search Article Archive Forgot Username/Password Archives Profit Academy Research Your Team Videos Text Messaging Terms of Use
FREE NEWSLETTERS
Total Wealth Research Power Profit Trades Profit Takeover This Is VWAP Penny Hawk Trading Today Midday Momentum Pump Up the Close
PREMIUM SERVICES
Money Map Press Home Money Map Report Fast Fortune Club Weekly Cash Clock Night Trader Microcurrency Trader Hyperdrive Portfolio Rocket Wealth Initiative Extreme Profit Hunters Profit Revolution Warlock's World Quantum Data Profits Live Trading Alliance Trade The Close Inside Money Trader Expiration Trader Flashpoint Trader Darknet Hyper Momentum Trader Alpha Accelerators Weekly Profit Cycles Brutus Alerts

© 2023 Money Morning All Rights Reserved. Protected by copyright of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including the world wide web), of content from this webpage, in whole or in part, is strictly prohibited without the express written permission of Money Morning.

Address: 1125 N Charles St. | Baltimore, MD, 21201 | USA | Phone: 888.384.8339 | Disclaimer | Sitemap | Privacy Policy | Whitelist Us | Do Not Sell or Share My Personal Information

wpDiscuz