Trading around earnings can be rewarding and at the same time disastrous depending on the stock traded and what earnings can bring. This year earnings have often disappointed in many stocks and Microsoft Stock could be another such stock. Earnings which are released on Thursday Oct 22 are expected to show a decline of revenue from $23.2 billion to $21.1 billion.
This is a decline of $2.1 billion and yet analysts believe the company will report an increase in earnings from 54 cents per share to 58 per share. This is a jump of 7.4% in earnings.
Often this type of earnings outlook leads to disappointment which can end up punishing a stock as we are seeing this morning with a decline in IBM.
Investors love to trade around earnings as option premiums are higher than usual. The problem is the chance of loss of capital is also high. To handle this, I developed a simple strategy that allows me to review a stock and determine what trade I should be considering which will protect my capital and yet offer a decent return. The return must compensate me for the risk I am taking and this strategy makes it easier to decide. The problem often though is that investors fail to have patience while waiting for their trade to develop to their advantage. It is important to not be driven by proft but instead be driven by safety to your capital.
This trade strategy article is for FullyInformed Members.
Understanding Put Selling Safety Heading Into Earnings – Microsoft Stock Trade Ideas for Oct 19 2015
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Disclaimer: There are risks involved in all investment strategies and investors can and do lose capital. Trade at your own risk. Stocks, options and investing are risky and can result in considerable losses. None of the strategies, stocks or information discussed and presented are financial or trading advice or recommendations. Everything presented and discussed are the author’s own trade ideas and opinions which the author may or may not enter into. The author assumes no liability for topics, ideas, errors, omissions, content and external links and trades done or not done. The author may or may not enter the trades mentioned. Some positions in mentioned stocks may already be held or are being adjusted.