It’s so easy to overlook the one thing that can stand out above all the rest when it comes to stock-moving events: an earnings announcement.
As I work through my watch list and drill down to more closely examine just how a stock is behaving, I ask a number of questions and evaluate multiple characteristics. Among them, I want to see what appears to be a nice risk/reward relationship between where I believe the stock can climb vs. where I think it could fall, and I want to see liquid options associated with the stock – preferably with rich premiums.
It’s at that step when I often notice that something seems to be up. If those options are perhaps a bit too rich, then I turn to the calendar and see when earnings are due out. (My favorites are Yahoo! Finance and EarningsWhispers.)
You might base your positions on technicals or fundamentals, but either way, earnings announcements carry the biggest “X” factor. The good news is that those events are scheduled, and you can find out pretty easily when they’re going to be released.
It all comes down to your willingness to own a stock going into such an event, knowing that price could drastically jump or dump literally overnight.
Personally, I’m more comfortable establishing a position once the most recent report has passed, giving the stock a bit more time to work on a trend before I need to worry about the next announcement. Your approach may differ, but it can sure help to have a position at work for you for a little while before that larger expected move arrives. Think about it. Then once you’ve decided, aim for consistency in whatever route you go.