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Preview of Chapters

Chapters 2 through 4 discuss the latest cutting-edge academic research on earnings announcements and earnings surprises. This is theory and empirical evidence garnered from decades of research using millions of publicly traded observations on earnings releases. Chapters 5 and 6 discuss the theory and evidence behind market reactions to earnings announcements, as well as the earnings surprises that these announcements create. The empirical regularities of market reactions to earnings announcements and earnings surprises represent the foundation from which we develop our options-based trades. Chapter 7 discusses some of the empirical evidence on optioned firms and then discusses the specific behavior of options around earnings announcements. Chapter 8 talks about some of the practical issues related to implementing your trades. Chapters 9 through 11 discuss our main options-based trading strategies. These strategies are short-term trades that are targeted at companies' quarterly earnings announcements. These three chapters represent the bulk of the discussion on options trades, using actual examples from recent earnings announcements. Chapters 12 through 15 discuss several other theories and empirical regularities that will help you improve the odds of implementing profitable options trades.

After reading this book, you will be better informed about the theoretical underpinnings of earnings announcements. We believe this foundational work is paramount to being a consistently profitable trader. As trading situations and economic contexts change, your foundational understanding will always be there to help you adapt. As the old saying goes, we don't want to just give you a fish; we want to show you how to fish.

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