Let’s Look at How Q2 2024 Earnings are Doing

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We are more towards the back end of earnings reporting for Q2. I went to a website I like to use for my research when trying to see how the overall results of earnings have or are playing out for the company’s in the S&P 500 to get that assessment.

Per FactSet, and the author John Butters, the info he supplied August 2 writes the index is reporting its highest (year-over-year) earnings growth rate since Q4 2021.

He reminds us at the time only 75% of companies in the S&P have reported.

He further states of those companies, 78% have reported actual EPS above estimates, which is above the 5-year average of 77% and above the 10-year average of 74%.

Though companies are reporting earnings that are 4.5% above estimates, this is below the 5-year and the 10-year average.

What I find interesting is he states during the past week, 3 of the Mag-7 stocks positive EPS surprises reported saw those stocks accounting for the largest contributors to the increase in the overall earnings growth rate for the index over this period.

There are still things concerning the markets outside of earnings, such as will the Fed cut half a point or just a quarter point in September.

Or what is the election result going to be? And how will that affect the markets and or what parts of the market depending on WHO gets elected.

I am monitoring this sell off and looking for old resistance levels that may become new support levels. Once a security hits that level I want to see how it reacts to that… will the security break down further or does it look like price is bouncing off it?

Markets in Focus: Sector SPDR (SPY)

Crazy volatility going on in the SPY as well as the VIX this week.

Tools and Observations: My Earnings Scan(s)

As we are awaiting the last 25% of companoes ion the S&P500 to report their Q2 earnings let me educate you all again on the earnings scan available in my tools.

One can look up what’s called Earnings Effects, which shows how well a security has performed in its last 4 quarters of earnings on a percentage move basis.

One can use this info to determine if that percentage move will be enough to make a profit on a straddle trade (where one buys both a call and a put on the same stock, same strike and same month expiration).
If one buys the straddle a way to anticipate profit is to assess if the security will move enough In-the-Money to profit over and above the cost of the straddle to begin with.

Let’s say for example a straddle on XYZ sotck costs $4.00 or $400 per contract.

If the stock is $100 it would have to move higher or lower at least $8.00 (higher above the call strike or lower below the strike put) by $8.00.

On a long call it would be helpful for the stock to rise to $108 so with Intrinsic Value alone the option should be priced at $8.00 at least.

Or it would have to move lower down to $92 so with Intrinsic Value alone the option should be priced at $8.00 at least.

If one can Sell-to-Close an optioin they bought for $.00 for $8.00 that should bring in a $.00 profit which is a double or 100% ROI.

Here is a look at the Earnings Effects page in www.tomsoptiontools.com and you can see it is a valuable resource and scannign tool.

Log in > Stocks > Stock Analysis > Earnings Effects

You can select a list or a symbol.  You can then select to see the track record after 1 earnings or 4 by either best price change or best IV change.  You can also analyze days to past or future earnings.

There is a help file on this page to help educate you further on the page and what the scan does.  There you can learn how to set your Wizard (or scan) Criteria as well.

For any of you liking the idea of trading options prior to. On or around an earnings announcement know this. It is a bit more risky than normally trading options due to the fact Implied Volatilty kicks in as a security gets closer to its earnings release date.

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