Earnings and How Things are Going Thus Far 2024

Tom Gentile

Posted in
Big Picture

By: Tom Gentile
April 26th, 2024

5 mins read

At this point earnings season for the first quarter is about halfway through. Based on expectations earnings are coming in better than expected overall.

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Latest info from FactSet reports , 46% of the companies in the S&P 500 have reported for Q1 2024 to date. 77% of these companies have reported actual EPS above estimates, which, per the report, is equal to the 5-year average of 77% but above the 10-year average of 74%.

The detailed FactSet report can be found here: https://insight.factset.com/sp-500-earnings-season-update-april-26-2024

My instructors and I don’t often trade options where we hold the options trade over the earnings announcement. We have seen situations where an option trade can be going well only to see the company make an earnings announcement and subsequent report (in a conference call or in print), something regarding there ‘forward-looking’ earnings and revenue picture and the stock can make a move in the opposite direction need for the option become profitable or even worse, take a profit that was there before the announcement and move into a losing situation.

A strategy one can consider if they do feel inclined to hold an option trade over the announcement is a Straddle or a Strangle.

A Straddle:

A straddle is an options strategy where one anticipates a move, either higher OR lower in price for a security.

The straddle involves the purchase of both a put and call option. The options purchased have the same options expiration date and the same strike price.

The anticipation in buying the straddle is for the security to make a move far enough (In the Money – ITM), to be priced at a value that is more than the cost of the straddle trade.

This means one has to believe there is going to be a pop or drop in price large enough to cover the cost and be profitable. The concern is there isn’t really anything that is going to happen (at least not to the public’s knowledge) that one can make a confident assessment or future price action.., EXCEPT for an earnings report.

There are pending FDA trials, Fed Announcements on interest rates, and shareholders meetings are a few other times where a news announcement regarding the company or the economy overall can be expected, but even those don’t guarantee what the actual decision or announcement will be.

The straddle allow one to be in an options trade with the opportunity to profit so long as the event announcement moves the security in a large enough fashion one way or the other.

The thing that can kill a straddle or strangle trade is not enough or no movement at all.

A Strangle

The concept of the strangle is the same as a straddle in that one is expecting a significant move in the underlying security to obtain a profit.

The difference between the two is where the straddle buys to open the same strike price call and put, the strangle buys to open and Out of the Money (OTM) call and put. It may cost less than a straddle, but it tends to need to move even more that a straddle in that is has to cover the out of the money difference between the security price and strike price.

When it comes to earnings and companies that are not producing any or seeing costs of operations exceeding any money coming in to stifle them from making profits, bankruptcy is a strong likelihood.

I have a new podcast to offer my insight on this subject.

My Most Recent Podcast April 26, 2024

May of you know and If not I am telling you all… I have a podcast that I provide regularly on my YouTube channel, https://www.youtube.com/@TomGentileTrader.

I provide insights on what I believe is going to affect the financial markets positively or negatively. I do this for my own trading, trying to ascertain a directional bias for the markets so I can then focus my options strategies based on that assessment. The goal of my Profit Strategies Podcast is to educate you on what I see happening, what I see may happen in the financial markets and then teach education on options strategies that could potentially profit on what I anticipate happening.

This week I am discussing Bankruptcy companies and what they have to do with spotting patterns. I then discuss how I use patterns I see in the economy, in everyday life, to then consider making options trades based on them.

Profit Strategies Podcast with Tom Gentile, April 26, 2024

Profit Strategies Podcast with Tom Gentile, April 26, 2024

When you are at my YouTube Channel I invite you to subscribe to it so you can get notifications each time a new podcast hits the channel.

Enjoy this week’s session and know I am keeping my eyes and ears out for anything I feel will help me ascertain what I see going on with the financial markets so I can pass it along to you in the form of the best education I can produce.

Tom Gentile
C1P: Chief 1-Percenter

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