How to deal with the upcoming Earning season

Apr 17, 2023 08:44 AM 1 Answers
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Hey Marty,

Have been a member of your service, I am holding CROX, ALGM, TGTX, AXON, IRDM, PANW and these are not from lower levels but recently got in with all these stocks consolidating.

How should I be dealing with these things going into earning seasons, and how can I minimize my risk of big gapdowns on earnings day for them.




Thank you for being a member of this servicešŸ™

This is an important question and I have a formula that I use for earnings season. As with everything else in the stock market, this is not a foolproof formula. However, it has kept me out of major trouble over the years.

I take the worst percentage loss of any stock in the past 365 days and add a 5% (stop loss) to the worst day. I need that much cushion in order to hold a full position into a quarterly earnings report.

For example, let's use CRO which trade down 9% in a session on May 5, 2022, May 24, 2022, June 16, 2022, September 22, 2022 November, 21, 2022 and February 21, 2022. That is quite. consistent record of trading down 9% in an individual session. I would add a 5% stop loss and call it a 15% cushion to hold CROX into its earnings call next week.

Remember, an earnings cal can also be a catalyst for a stock. The conference calls can be a time for a company to show off how they have been taking market share. If you are going to hold a stock Ā for long term (one year or more) then you are going to sit through at least four quarterly earnings reports. The shelf like for an average growth stock is 10 to 24 months. That is quite a few quarterly earnings reports.

I created a short video to explain this concept.





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May 04, 2023

Hi Marty,

Wasn't sure if this Q&A was intended to allow for open questions. Thank you for this answer. I was looking for an approach to earnings such as this where earnings and current market conditions can have upside/downside outcomes.

  1. Would you set a stop loss / manual or hard for that downside + 5% cushion indiscriminately and get back in as needed?
  2. Would you ever sell partial or full of your core position prior to earnings speculating and also considering market sentiment? why or why not?
  3. Do you generally manage earnings for all your positions that you are holding position swings in this style (and not necessarily long-term like AMD, NVO that you've referred to in your TraderLion interview. Those you would just buy / hold, add on major dips / recession and for indefinitely)
  4. Where options are available, have you used options to hedge out earnings. either through simply
    1. Long Put (atm or slightly otm, or multiple farther otm especially if you are looking to cushion at worst day + 5% anyways?), or
    2. Collar (Sell Call, Buy Put) Strikes can vary depending on bias and pricing. Collar does limit upside risk, but you can possibly buy more stock or use an OTM Call for upside potential
    3. Put Backspread (Sell a Put and Buy Puts at a higher ratio)?

In regards to shelf life for an average growth stock 10-24 months, are you suggesting that that would be the longest you would hold a high growth bagger stock and look to lock in gains after 10-24 months.

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