Markets ended with a strong push upward on Friday but as we enter the next couple weeks earnings updates may send stocks in any direction. Earnings are always a wildcard and can make difficult to predict trends even more erratic.

This earnings season is expected to be even wilder as we are comparing year over year to the thick of the pandemic in 2020. This means expectations will have to include adjustments that will make targets extremely subjective.

While it may seem like this is a time to back away and let the dust settle, it is actually an great time to find some low risk options trades that could be huge gainers as a result of the potentially big jumps from earnings wildness.

Spotting them and finding the biggest leverage and best risk reward candidates is not impossible.

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The first earnings due out are JP Morgan and Goldman Sachs so we will be keeping an eye on how their movement impacts the Dow.

If we use GS as an example, It has been in a range between about 350-400 and ended last week with a move up to its 10 day moving average. If it takes a sharp move towards the top of it’s current range, a call option might provide a nice gain.

A quick play could be to take the July 16 $380 call currently at $3.50. If we get an upward spike after earnings, it could be a nice payout. If we look at adding a little more time, another consideration would be an Aug 20 $380 call. It tacks on additional premium at $9.35, but that same move could also provide a decent gain.

If you are trying to pinpoint what the momentum looks like for GS to get a sense of which trade best fits your style, you should definitely check out Lee Gettess’ Momentum Trading With Precision. It can help spot the confirming factors to make sure you grab the right trade.

Keep learning and trade wisely,

John Boyer


Market Wealth Daily