Trading stocks at earnings 🌟💰 💸
One of the topics I'd like to cover in my Steemit articles is finance, mostly investments and trading. Today I'm writing about company earnings and trading stocks during that time. It's just a quick introduction that I will follow up with other articles.
What are company earnings?
You might have heard the word earnings before. Public companies (companies listed on stock exchange) announce their detailed financial information for the investors and stakeholders to know how the company is doing. This happens four times a year - every three months. Each company decides their own date and time to announce it.
What is the connection to the stock price?
The financial results affect the stock price a lot - generally, if company does well and the earnings are well, the stock price will go up. Investors expect that they company will continue to have a good results and buy more shares and as a results it pushes the stock price up. The opposite happens if the results are bad.
Unfortunately, it is not that straightforward. Sometimes, the results are good, but the price goes down. It might happen because investors expected even better results than that. Opposite to that, the results might be bad, but price goes up. It might be that other companies in the same sector have even worse results.
Why to trade earnings?
Trading earnings brings high volatility - the stocks moves a lot (either up or down) and you can quickly make (or loose) couple of dollars. That's quite exciting and you can add it as your other strategy for your trading. The stock market is open during business hours and companies announce their earning either before the stock market open or after the stock market closes. Afterwards, all the big players line up their orders and quite often, when the stock market opens, the stock price opens up with a gap of couple dollars.
How to trade earnings?
There's couple of ways to trade earnings.
(a) Stocks.
The simple way is to use stocks. If you believe that the stock price will go up, you can buy the stock before the earnings are announced. If you are lucky, the earnings are good and the stock price jumps up, you can close the trade on the next day and earn a profit.
Of course, it is very difficult, or rather impossible to judge how the stock will move. You can think that you have a 50/50 chance to be correct. That's quite good - well better than casino! You can think of it like that. It's important to have a good money management and keep your trade size consistent.
(b) Options.
Stock options allow you to create more varied strategies. For example, you can create a strategy that gives you profit if the stocks price moves by a big amount, no matter the direction. You can also create another strategy, that gives a profit if the stock price does not move or move a little.
Last week examples
Let's have a look at the companies that had earnings last week and how the price moved.
RHT - Red Hat
MU - Micron
NKE - Nike
BBRY - Blackberry
RAD - Rite Aid
What's next?
In my future articles I'll cover information about brokers and some more details of trade examples.
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