What I’ve learned, what has worked, what hasn’t worked, and what may help you after $845,203.28 worth of trades in 4 years.
ROKU +31.41% & How to Trade Earnings
ROKU crushed earnings Friday, July 28 closing +31.41% for the day. Anyone who bought call options the day prior saw insane profits. But buying options prior to earnings will give you less than a 50% chance of profiting.
Here’s how to trade earnings:
- Set your levels on the 1-Day & 1-Week Timeframes prior to Earnings release
- Wait for Earnings Result before taking trade
- Identify pre-market highs & lows especially on gaps
- Use smaller intraday time frames to enter trades & identify risk levels
See ROKU 1-Day Chart Below:
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Now wait for the earnings result and mark pre-market high and previous day high. In this case, the previous day's high acted as support during pre-market shown on 15-min chart below:
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Once market opens, we want to find an entry. You can’t just buy asap. You can see the flag just above pre-market high on 1-min chart below. If you entered on the flag breakout, you could use the pre-market high as a stop which is a substantial level
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Even if you entered around this price level, you still had an opportunity for a 14% move on the underlying. Insane profits considering this was on a Friday and you were trading lottos.
So why not just buy before earnings? It’s a 50/50 shot.
That’s not true when trading earnings. Leading up to an earnings release stocks have an increased expected move or implied volatility which is factored in option premiums (option pricing).
Let’s say ROKU’s implied volatility was +/-14%. If you had call options and ROKU beat earnings and gained 5%. You’re contract is likely worthless.
Earnings with good charts or trading at, or near 52-week highs are my favorite setups. I’ve made some of my best trades trading the day after an earnings release including AMD, NVDA, NFLX, and ETSY to name a few. Unfortunately, I missed the ROKU move.
As always, let me know if you have any questions!
Talk soon.
Stockonomy
What I’ve learned, what has worked, what hasn’t worked, and what may help you after $845,203.28 worth of trades in 4 years.
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