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The complete guide to profiting by taking targeted, short-term option positions timed to exploit quarterly earnings announcements.
Profit from earnings announcements, by taking targeted, short-term option positions explicitly timed to exploit them! Based on rigorous research and huge data sets, this book identifies the specific earnings-announcement trades most likely to yield profits, and teaches how to make these trades—in plain English, with real examples!
Trading on Corporate Earnings News is the first practical, hands-on guide to profiting from earnings announcements. Writing for investors and traders at all experience levels, the authors show how to take targeted, short-term option positions that are explicitly timed to exploit the information in companies’ quarterly earnings announcements. They first present powerful findings of cutting-edge studies that have examined market reactions to quarterly earnings announcements, regularities of earnings surprises, and option trading around corporate events. Drawing on enormous data sets, they identify the types of earnings-announcement trades most likely to yield profits, based on the predictable impacts of variables such as firm size, visibility, past performance, analyst coverage, forecast dispersion, volatility, and the impact of restructurings and acquisitions. Next, they provide real examples of individual stocks–and, in some cases, conduct large sample tests–to guide investors in taking advantage of these documented regularities. Finally, they discuss crucial nuances and pitfalls that can powerfully impact performance.
Download the sample pages (includes Preface and Index)
About the Authors xiii
PART I: INTRODUCTION
Chapter 1: Introduction 3
PART II: THEORY: EARNINGS ANNOUNCEMENTS AND EARNINGS SURPRISES
Chapter 2: Earnings Announcements: Why Are They So Important? 13
Chapter 3: Earnings Surprises: Definition and Measurement 23
Chapter 4: Earnings Surprises: Empirical Evidence 39
PART III: EVIDENCE: MARKET REACTIONS
Chapter 5: Market Reactions to Earnings Announcements 49
Chapter 6: Market Reactions to Earnings Surprises (Are Full of Surprises) 57
PART IV: IMPLEMENTATION: OPTIONS TRADING STRATEGIES
Chapter 7: General Characteristics of Optioned Companies and Options Behavior Around Earnings Announcements 71
Chapter 8: Practical Considerations Before Implementing Trades 77
Chapter 9: Directional Bets: Long Calls, Bull Call Spreads, Long Puts, and Bear Put Spreads 97
Chapter 10: Long Straddle and Strangle Strategies 111
Chapter 11: Short Straddle and Strangle Strategies 135
PART V: FINE TUNING: IMPROVING THE ODDS OF A PROFITABLE TRADE
Chapter 12: Growth Expectations and the Torpedo Effect 153
Chapter 13: Revenue and Expense Surprises 161
Chapter 14: Earnings Surprise Persistence 167
Chapter 15: Other Theories and Evidence 175