How to Trade Earnings Pre Announcments
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How to Trade Earnings Pre Announcments

John F. Carter 1/15/2014

The goal here and again we don't know if this is going to happen or not. So we had the big move in Tesla here. We broke...we had the announcement. We utilized -- wanting to get into this big move...squeezes on the one minute chart to kind of get in with the idea that we would rally into the close.

Now in a perfect world here -- again, you know, the market doesn't care what you want it to do. But in a perfect world here we'd actually punch out to new highs into the close, we could take some profits. And then I do expect this actually to gap up in the morning as well. Typically on something like this when a company gives forward guidance like they said, hey our earnings are going to be 20 percent higher in two days. That's what caused the volume to spike, not only do you get all the short covering from all the hedge funds who have been short Tesla, not only do you have a breakout of this huge of this huge down trend line on the daily chart which is huge on big volume. OK.

So over the weeks ahead this Tesla could easily just keep on going, but then tomorrow you'll have the banks just kind of falling all over each other to upgrade. So although I want to take some profits on this position today it's very very likely that it gaps up in the morning as well with the idea that all the banks kind of trip over each other to upgrade the stock, right. Not that they could foresee it but boy, if they're already going to do better might as well upgrade the stock. So let's see if we can get that last little push here. We got another little one that it squeezed. This could trigger long. It should give us our last little push in the close. Let's see if we can look at some time and sales here too. See if we can get that run up. So the high today is what around 162. So the high is exactly 162, so here we go. Volumes coming's like push, see if we can get that run into the close here.

We've got like 7 minutes... so close and yet so far. So here we are trying to head back to the snow line here. We've got about 6 and a half minutes. You know, a lot of stocks really look good. Like when Google, I mean you know, it's at all time highs. I'd like to see if there's a gap tomorrow on it and get aggressive with that. For Tesla I just want to focus on this and see if we can take some profits on this trade into the close.

Again now, the war going on right now is all the people who day traded this starting to take profits versus all the hedge funds that are short an needing the cover. So we'll see who wins out here. Typically, on something like this you'll see that rallying of the close or maybe after hours. Now I don't think -- I don't know if Google will gap down at all. It's like if it does I'd want to buy it. All right. Let's see if Tesla can run here. If Tesla can get through this little minor Voodoo line here at 161.38 we should have popped new highs into the close. And then I've got a -- let's see, I've got a note here -- I got a little note here saying that I need to dump some of this Tesla into the close. So let's get that done. I'd like to do it -- again the market doesn't care what I like but I'd like to do it if we could break out here and then just offer it out. And then in that way we can ease the pain of short sellers. Because I like to help out hedge funds if they're really getting hurt on something like this where they're short, I would like to help them out by providing liquidity for that. So let's see if we can do it here...oh, so close.

Still a little bit of a battle here. OK. I have gotta quit screwing around here. So, all right so the position I have on this I've got -- the reason I've got the margin call is I've got 30,000 shares of stock. All right. So that's what's driving this. So what I need to do is unload some of that stock, obviously a big trade in what I need to do to make sure that they're happy here into this is -- that's the stock part of this. I'll probably dump the stock and then keep the options. And what I'd like to do here is -- all right, the high was 162. Let me see here if I can throw some out here at like 161. Let me see -- yeah so this is one of those moments when things come together. You just rock it out. OK.

I'm trying to look at a chart here too. Wow, this is time and sales. We don't need that. Let's put this on a 5 minute chart. So we can see a little bit here, not a big pop here to the close or anything like that. All right. Let me put some -- I'm going to put some orders here. All right. It's starting to run here. OK. There we go. A little bit of bid action. Here let me see if -- this will probably completely jinx it -- let me see if this turns into a 7 figure trade. Oh, I'm going to completely jinx it here by saying that. That's called a high five trade which you don't want to do. Let's close. Oh, and there we go, first million dollar day trade. Wow. OK.

So let's get some of that out of here. So what I want to do obviously here is get rid of some of the stock and I need to hurry. So let's put in 5,000 at 161.75. I want to help these short sellers out. And if I was smart I would probably take off some of the options too and on that I would have to hurry. So let's take off some of those. I don't want to sell all of them. But it would certainly make sense to sell some of them. So sell in half in theory. And on that one I've got 2 minutes left so hopefully that -- hopefully Tesla continues to rally here. We are trading 161.38. I may need to bring -- of course after hours I could still sell the stock. Oh, all right. Let's see here. A minute 39. All right. Let me -- gosh I gotta focus here guys here, sorry. All right.

We've got a minute 15, so I would like to kind of sell off a little bit more of those options. And then for the stock I told them that I would. So let's bring this down a little bit here. OK. So we're off a little bit there. Push...42 seconds...come on hedge funds. I'm trying to help you. Take it. All right. Let me bring this down a little bit here. All right. That should help. And we're closed. OK.

So then the plan for tomorrow, this will be in the video here for Tesla. Now I don't know what Tesla's going to do tomorrow. You know, it could gap down. I'm making a bet that we gap up. Now if we gap up into the 163, 165 level that would be a perfect area to take a lot off the table, especially in the options that expire this week and then see if we can come up here.

Obviously you want to have your appropriate stops in place. And my guess is, is that tomorrow morning some upgrades will come out and everybody will kind of -- the banks will kind of be tripping over each other to give those upgrades out and in that case we should see a little bit more upside pressure. But really these kind of moves are vicious. They're going to be more vicious to the people who are short here. And at this point again, it makes sense that we gap up. You'll notice that's when I call it feeding the ducks. You know if it gaps up in the morning it's going to be on CNBC, people are going to be buying it, great. Take your position. Sell it....sell at least a quarter of it. If you've got one contract go ahead and feed the ducks and then go ahead and look on to the next trade. So we'll see. Hopefully it gaps up in the morning and we can actually follow our plan without any stress. Otherwise we'll go from there. We'll know a lot tomorrow by about 9 o'clock in the morning, central. All right. Hope it helps and have a good night.

So well in a big part there was a lot of questions today on OK, so why -- so John, why did you pile on to the Tesla bandwagon. Well this doesn't happen very much, but first of all this has to do with earnings and it was a pre earnings announcement and you get alerted by this when the volume spikes. And if on a 5 minute chart you get a volume spike like this, like a million shares, there's something going on. OK. And you could do it as a percent. I mean it's up you know, the volume spikes up like 6 or 700 percent on that. So then when I saw this then I looked at the news and by the time I figured out what was going on I actually missed all this. But I ended up getting here and loaded up on some calls and the stock and some things like that. And then there were some other areas to add along the way. OK.

This is a text book strategy for what's called a pre earnings announcement. OK. So we do have a lot of earnings coming up right smack into earnings releases. So what I'm going to be doing on Saturday is essentially the ultimate guide to earnings trades. And Tesla, when you get a pre announcement like that, it's actually an earnings trades -- it's a pre announcement earnings trades -- there's a specific way to trade. Because what's going to happen is all the hedge funds are going to be stuck short and that's going to blow the price up. And it's like, OK, how do you get in something like that without chasing it.

I'm going to talk about the option strategies I use around earnings, how to determine which strategy to use and when. Because essentially you know, here's the earnings date. OK. There's three trades to do. There's a trade to do here about three weeks out, OK. There's a trade to do here just before they're released and then there's a trade to do here right after the release. And these three are a staple of any type of earnings trades. And then more importantly too, especially if you're doing the one right before earnings, is how do you defend that. And I'll be talking about that as well.

We'll talk about what are the best stocks for earnings plays and which ones to avoid, the one guarantee with earnings and how to play it, how to trade earnings with a smaller account, how to protect your account when things go wrong, money management tips for earnings trades, and we'll be placing some real trades live as well. There will be a Saturday class and then there will be a follow up live trading you can see on the 21st, in to the close from 2 to 4 east coast time. And then Wednesday the 22nd to manage those trades. You can actually see this in action, live. OK. This will be a good class and it will be recorded if for some reason you can't be there on Saturday. If you scroll down here, we are going to -- this is kind of a staple course that we'll do. It's going to be a Saturday and then two live trading sessions, $497.00. If you are seeing this link you can get signed up for it. And again this will start this upcoming Saturday, which is...what day is this Saturday...I think the 18th. And it'll go from 2 to 6 east coast time, which is about 1 to 5 central time. All right. Looking forward to seeing you there, Have a great night and we'll see you at the next update.