Going 5 for 5 on earnings set up trades…

In the last few months, we’ve risked some capital on some quick trades, especially around earnings reports.  Indeed, we traded the following stocks to the long side using call options before their respective reports:






And we got pretty lucky on all of them, having caught a big pop after the report.  I know that was exciting and I wish I had some of those every day. But just as important as hitting some of those post-earnings pops is the idea of avoiding big hits.  Best Buy, for example, I would have guessed with my feet to the fire that the stock would more likely go up today after its earnings report mainly because the stock has already been crushed so badly and estimates had been steadily taken lower and lower over the last few months.  But I didn’t cite BBY as a trade before the report because I didn’t feel like we had an edge that the report would have been better than expected or even as good as expected.  And while I wouldn’t have been surprised to see that stock pop even on the less-than-stellar earnings report that they did give, the set up wasn’t a great risk/reward.

And so today, we have a bunch of stocks that are up 1-2% again and a few down likewise.  And that’s not nearly as exciting as the quick trades.  But this is why I keep talking about discipline and waiting for the right pitches.  Because going 5 for 5 on earnings set up trades isn’t possible if we reach and swing at every pitch.

All this is to say that if you were scaling in to the best stocks including using some options while the DJIA is down below 11,000 as I’ve been steadily doing when the markets are below 11,000 then it’s okay to just let things play out for a bit as we have been doing.  There will be more pitches if we go lower. And we’re set up to make some big profits on any sustained rallies as our various-dated/various-strike call options really kick in.

Don’t force it though.