So far, during the early part of this earnings season, we’ve managed to place four trades (Goldman Sachs, American Express, Microsoft and Starbucks), all winners. Our returns so far this earnings season . . . 39.3%. In 2020 . . . 263.7%. Since we started the portfolio three years ago . . . 884.1%.
But enough of that. Let’s move on to next week
I have a few trades on the agenda for next week and today I want to focus on one specific earnings play, CVS.
CVS announces earnings before the opening bell next Friday . . . and I plan on making an earnings season trade Thursday afternoon, just before the closing bell.
Unlike most analysts, I don’t fret over the numbers released, so EPS, revenues and projections don’t enter my thought process when placing a trade around an earnings announcement.
Because my trades are based on a quantitative approach. It’s an approach based on hard statistics like probabilities. Moreover, my trades are purely mechanical, so little to no emotion is involved when getting in or out of the trade.
Well, it’s something called the expected move or expected range . . . and the market give us this information in real-time. It is a wonderful way to lay the foundation for all of your trades, now and certainly in the future.
Here is the expected range for CVS.
You see, the expected move, as highlighted in the brownish colored vertical bar above tell us that the market expects CVS to trade within the highlighted range of roughly $52 to almost $60 through Nov. 13.
As I stated last week, most investors and traders alike don’t realize that only 20% of stocks push outside of expected range at the expiration. That’s right, 20%.
Because we know this fact, the expected move allows us to create an easy range-bound trade based purely on probabilities. It’s also what has allowed us to reap consistent returns, earnings season after earnings season, for the last three years.
Now, my preference when I’m placing earnings season trades is to use a high-probability approach. I like to select trades that have probabilities above 80%.
On Thursday, during my live event, I WILL be placing an earnings season trade in CVS. If you want to see how I trade CVS and how you could potentially make 20% or more, please make sure to attend. I will be going over all the mechanics of the earnings season trade, including the exact strikes, price and more. Click here to register for my webinar next week.
See you all there!