You want to trade stocks but dread the earnings season? Keep reading to find out what you need to know about the earnings season to understand how to take advantage of it with peace of mind.
In this article
What Exactly is Results Season and What do you Need to Focus on?
Every quarter, companies publish several key figures describing their performance over a given past period – this is called the earnings season. Among the most important figures usually published after the last month of each quarter are net revenues, earnings per share (EPS), and net sales. These figures give you a better understanding of the performance of these companies.
As an investor in the stock market, you should follow these figures to determine the growth potential of a company and its stock price. You can also follow earnings calls – which are conferences between the company, some of the most well-known analysts, and major investors – as they may provide you with more information about the published report and the company’s development prospects.
Beyond the figure itself, you should also look at the difference between the published figure and the analyst forecasts. It is also important to compare the published figure with the figure for the previous period, as all these differences can greatly impact a company’s share price.
How to Trade the Earnings Season
Stock trading activity during the earnings season can be done in several ways.
You can buy the stock of a company you are interested in, either before or after the results are released, or you can use CFDs (Contracts for Difference) on that stock. In that case, you will not hold the shares of this company (you will not be a shareholder) – you will only profit from the change in its price.
CFDs are an interesting option for those who want to take advantage of potential price volatility during the earnings season, as you do not own the underlying asset to which the CFD is linked. In addition, you can make a profit regardless of market conditions, as you can profit from rising prices (with a long position or buy position) and falling prices (with a short position or a short-sell position).
You can also take advantage of the equity options market to determine whether investors are feeling positive or negative about a company’s performance. In addition, it is possible for individual traders to take advantage of call or put options to protect their portfolios from potential large price movements or to seize trading opportunities.
How to Follow the Earnings Season
Since it is essential to know when the companies you are interested in publishing their results, you must use the necessary tools to know when the publications take place. The most relevant tool is the results or economic calendar, which includes all the important figures and statistics to be published. Usually, your broker will provide one for its traders, but you can also use those offered by many reputable sites, such as Yahoo! Finance or Bloomberg.
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