Earnings season kicks off next week with the big institutional banks JPMorgan, Citigroup, Wells Fargo, Goldman Sachs, Morgan Stanley and more.
Since introducing Earnings Season Trader we have seen tremendous, and more importantly, consistent, returns. Click here to see how you could have turned $5,000 into $2.5 million.
As investors, our goal for every earnings season is simple:
We patiently wait for the best opportunities the market offers.
Our goal is to get in and out of our trades in less than 24 hours – reaping 10% to 22.5% with each trade. But our patience allows us to experience a few big winners during every trading window.
With a win rate well over 80%, we understand the importance of sticking to a mechanical system. We allow statistical laws to do the real work for us.
The consistency of profits, small and large, over the long term is what makes our earnings season strategy truly special. We understand the probabilities are right there in front us.
It’s our job to allow these statistical truths to work their magic without our emotional interference.
Today I want to introduce one of the key statistical tools that have led to the strategy’s overwhelming success. It’s called the “expected move” or “expected range.”
Since we are midst of the MLB playoffs, think about the expected move like you would a strike zone.
The ultimate goal is to throw a strike, right? In an average baseball season roughly 715,000 pitches are thrown. Roughly 62% of those are strikes.
Most investors don’t know this, but the market gives us a defined zone as well . . . and it’s called the expected range. Thankfully, our strategy is designed to throw lots of strikes. Our strategy has a strike rate (win rate) well over 80% since we introduced it to the public three years ago.
The expected move is the amount a stock is predicted to move, up or down, by a given expiration date.
For instance, take a look at the expected move for Citigroup. The company is due to report earnings prior to the opening bell on Tuesday, Oct. 13.
The orangish bar in the middle is the expected range of Citigroup at expiration next week.
So, if we look above, we can see that at the close on expiration day, the market expects Citigroup to fall within a range of roughly $42.25 to $47.50. That’s a range of $5.25. That leads me to the key statistic that is the foundation of the earnings season strategy:
80% of all moves after earnings reports fall within the expected move.
Bingo! The expected move is our strike zone. And by placing a trade around the expected move, our strike zone increases dramatically.
Next week I will be going over, in depth, how I take advantage of the expected move and use it to place trades around earnings announcements. Remember, this strategy is up 224.4% year-to-date and up over 800% since we introduced three years ago.
This one statistic is the reason why I have managed to be so successful since I introduced the earnings season strategy to subscribers 36 months ago.