Showing posts from August, 2020

Option Strategies for Earnings Season

Buy a stock just before its earnings report is a bet: it can be highly profitable or devastating for your portfolio. You decide the risk you face. I always prefer to wait for the report, to compare their numbers with the estimates in EPS, sales, and guidance, review the conference call for some additional data and see the next day analyst's ratings, which usually increases or decreases their weighting and price target. And, of course, you can use specific options strategies during these events. Let's overview some ideas as to choose the right strategy. You need to know the following principles: -  A strategy that involves  long  options (been calls or puts) will typically  gain value as IV increases  and lose value quickly with IV decreases. - On the contrary, a strategy that involves  short  options (been calls or puts) will typically  gain value quickly with IV decreases  and lose value as IV increases. - During an earnings event,  the implied volatility IV of

Markets remain artificially driven by the Fed

As I explained in previous posts, as many cautious traders, since coronavirus emerges, I am working with day and swing trades only, without even creating the usual long-term portfolio , due to the bizarre behavior of the stock market in this year 2020, artificially pumped by the Fed, with not only economic but political intentions. The recovery since March was a great opportunity for gains, now is time to protect them.  I am expecting a necessary market correction in the next weeks or months , as we h ave an extremely overvalued market, which is not in line with the real economy and with many index indicators about to explode (for example, the SP500 put-call ratio or its PE ratio above 25, unseen since 2008 ). Levels to watch this week in main indices The key to a successful application of  Price Action Trading  is to choose the appropriate  support and resistance levels and wait patiently for the price to approach or reach one of them to start making entry decisio