- Interest rates are collapsing, which makes profit growth for banks difficult at best.
- Trading earnings is all about the odds, and the odds favor the downside with banks.
- This is your opportunity to buy put options on banks and profit.
Earnings season is officially here. Let the trading begin!
This is your opportunity to exploit the massive volatility that hits once operating results are released.
Alcoa (NYSE:AA) kicked off things with a stellar report. Shares spiked shortly after, moving much higher than the implied volatility option markets predicted for the stock.
The action confirmed the summer of Janet Yellen trend this earnings season. And with that, it’s a pretty safe bet that commodity stocks will perform well when results are released.
And the market concurs—major indexes reached new highs after Alcoa announced earnings.
Even financials, laggards for much of the year, participated. Such participation is critical for the health of the current market going forward.
But I’m not counting on it.
Interest rates are collapsing, which makes profit growth for banks difficult at best.
On July 15, several big banks report earnings…
With economic growth in the U.S., look for earnings to exceed expectations. The issue will be on the top line and going forward.
The calamity of Brexit at the end of June and yield curve flattening could be disastrous for results going forward. Expect guidance for all three of these banks to be cautious.
With shares up strongly in advance of the reports, the bias for these stocks thereafter will be to the down side.
What I tell members of my Earnings Player service: This scenario makes for a unique opportunity to buy a basket of put options on each in advance.
The risk/reward of a put option trade is in favor of the trader.
Stocks have had an impressive run. Upside from here is limited to pristine earnings.
I doubt the above banks will be close to pristine. On Wednesday, Commerce Bancshares (NASDAQ:CBSH) issued its report…
The company beat on the bottom line, but missed on the top line. Shares were flat in trading after the news was released.
For the bigger banks, expect much of the same or worse.
Trading earnings is all about the odds, and the odds favor the downside with banks.
Owning a basket of puts is a great way to trade the opportunity and add profits to your portfolio at the start of earnings season.
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