Earnings plays using shares

I’m adding a new approach to my options-based trades: Playing earnings announcements using shares. It’s an extension of my use of Zacks earnings surprise predictor to encompass a greater pool of stocks than is available using options.

One basic requirement of options trading, aside from the obvious availability of options contracts, is a high degree of liquidity. Options are leveraged, and that means the bid/ask spread can get quite wide on positions built from the contracts. That limits the stocks I can trade, and indeed long-time readers will see me trading same symbols over and over again.

The no-fee brokerage Robinhood provides an opportunity. There is no cost to entering or exiting a trade, meaning I can get my with relatively small profits using unleveraged shares and still have the trades be worth the effort. This allows me to broaden my trading to encompass more symbols.

An added advantage is that companies with liquid options tend to cluster their earnings announcements, leading to three weeks of stormy activity four times a year interspersed with the doldrums. Companies with less liquid shares often publish outside of earnings season.

It works like this:

The share trades will last a day — in the day before earnings are published and out the next trading session, whatever the results.

All trades are to the bull side; no shorts.

The trade selection will be based on three metrics, all taken from the Zacks site: The score (1 through 5, bullish to bearish), the earnings surprise predictor percentage, and the beta.

The score must be 3 and higher, and the predictor must be positive.  The beta is used for reference, but higher is better.

I rank by score first, in ascending order, and then within each score by the predictor, in descending order. From that I select however many trades I wish to make that day, generally two or three at this point.

And that’s it.

I shall add the shares to my prospects and agenda updates to my Live feed, and shall report the trades in a single post daily, headlined “Shares” and the date.

By Tim Bovee, Portland, Oregon, November 3, 2017


Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

One thought on “Earnings plays using shares

Comments are closed.