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 the underlying usually…

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 have 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 decisions. Once decided, the targe…