I am filtering through all companies that are reporting earnings this week, comparing them against certain screens, and playing their earnings with call or put options. This is the first time I have done this so systematically, and it is extraordinarily time consuming. Does anyone have any comments as to whether or not this is good, poor, or alpha neutral strategy, on balance?
Hi, Extract from email i got from my bud last night who is playing "earnings" results of companies.. Sent : Friday, April 27, 2007 9:27 PM shit...i spent hrs doing checking the gapping plays for two stk in screener. I did nothing. Guess what VSEA gap up $6 pre-mkt FLIR gap up $3 pre-mkt aaaaaaaaargh!!!!! Conclusion: U got to spend lots of time researching on stocks and most wonderful thing is in the end you 'chicken out' or u got the direction wrong ..tsk tsk Nick
Hi, Earnings is not hard, easy, yes, no..its quite damn confusing at times.. Company A rpted 'blowout' numbers but the stock gap down instead cause its below mkt consensus. Company B rpted 'nasty' numbers but the stock gap up instead cause its above mkt consensus. Company C rpted 'record' numbers but its 'inline' with the mkt consensus and the stock gap down due to the dissapointing numbers. Blowing the brains that what.. Nick
Unless you are playing vols i would stay away from using ops around earnings. Trading deltas is a real crapshoot during those times and you will churn at best over the long haul.
I can't disagree with a single thing said so far. It's a tricky and unpredictable catalyst. As someone said - Company A beats eps estimates by 12%, and gaps up 21%. Company B beats eps estimates by 20% and gaps down.
Trade small size in long atm straddles. Get flat gamma with spot in the AH on the outlier. No outlier? Sell the small straddle position when the bell rings.
its worked excellent in 00-02 , but not lately. Actually doing the opposite is better strategy right now ( going long , not exactly at the bell ; a bit later) , especially if press conference is still to come at 10-11 a.m
Imagine that, cause and effect at earnings anouncements seem to be random. Eugene Fama and Burton Malkiel are smiling about now.