It’s been a tumultuous 18 months since Covid first descended, roiling personal lives, businesses, and the markets. While things keep continually flowing, we humans (prisoners to time), like to mark the days segmenting periods in order to assess past actions and set future goals.
Today marks the end of Q3, as September proved to be seasonally weak with the SPDR S&P 500 Index (SPY) and Nasdaq 100 (QQQ) experiencing their worst month since September 2020 — the indices lost 4.7% and 6.1% for the quarter.
Again, the index numbers need to be taken into context in two ways; both are still up some 14% YTD, with those numbers masking the turbulence beneath the headline numbers. To repeat for the umpteenth time, the big five of Microsoft (MSFT), Alphabet (GOOGL). Apple (AAPL), Facebook (FB), and Amazon (AMZN) account for nearly 27% and 45% respectively of the market-cap-weighted SPY and QQQ.
Until two weeks ago, those names carried the indices higher. However, since then, they’ve lost an average of 7%, as it appears that the market’s rolling over with people contemplating a true market “correction.” But, in reality, the correction was already well underway. Even as indices hit new August highs, we now have 50%-plus of the SPY and 25% of QQQ stocks have 10% below all-time highs with nearly 20% have declined by over 20% in the past three months. Meaning, we’ve already had a rolling correction through time and rotation.
I think we’ve heard enough from politicians, central bankers, and the new cadre of epistemologists. Here comes the earnings season, which lets us hear straight from the companies. It should be the acid test for where stocks go from here.
Why Should You Play Earnings?
Mostly, stock prices are random walks towards parts unknown. Sentiments, fleeting news narratives, and cursory analysis are applied to explain their various ups and downs. However, they’re mostly ascribing reasons after the fact.
However, four times a year, the truth about a company’s profitability, or lack thereof, is revealed, causing stock prices to react immediately and often dramatically. I’m talking about quarterly earnings reports, which provide an unvarnished accounting of companies’ state of business and its immediate prospects.
This quarter should be particularly interesting as companies face tougher year-over-year comparisons, the Delta variant hiccup, and stubborn supply chain constraints. This has resulted in analyst estimates being reduced for the first time in the past 5 quarters.
I expect this to lead to very high implied volatility heading into the reports; the pumped-up premiums will provide us with opportunities to harness the predictable options price behavior of Post Earnings Premium Crush (PEPC) and Pre-Earnings Premium Expansion (PEPE), using carefully selected strategies such as basic vertical spreads, iron condors and double diagonals.
I’ll discuss some specifics over the next few days. But, the real details will be revealed and a new live trade will be made during Monday’s web call. This is an event you do not want to miss!
Before I see you on Monday, here’s some general Earnings360 service info you should know about:
- We make about 30 trades per quarter, with each trade recommendation alert sent through text and email.
- You’ll get detailed explanations of the rationale for employing specific options strategies.
- Alerts provide exact step-by-step instructions on how you can place the order using defined-price limits.
- Earnings360 typically sends approximately 25-30 trade recommendations during the six-week program’s duration.
- Earnings360 has enjoyed 13 out of 14 winnings seasons; that’s 276 out of 410 trades being winners (a 67% win ratio).
- Member profits have almost doubled the losses (an average of $124 vs $74). That’s $22,000+ in total gains in the past 14 quarters!
- This is conducted in a very controlled and conservative manner — the average trade has a defined risk of just $315 per position.
Let my unique option-centric approach lead you through this fast, fun, and profitable period. Do not miss out on the action of this upcoming earnings season. Grab Your FREE Spot in the Earnings360 Webinar!