Simple Trades, Monster Profits

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1 Simple Trades, Monster Profits Module One Trade Earnings for Triple-Digit Profits Jamie Dlugosch The Earnings Player

How To Trade Earnings for Triple-Digit Profits According to the SEC, all publicly traded companies are required to report earnings on a quarterly basis.

We think that's a mistake. By following the simple road map that we'll provide you here in following modules, you can make the unpredictable predictable, and therefore, tradeable. Why trade earnings?

2 How To Trade Earnings for Triple-Digit Profits According to the SEC, all publicly traded companies are required to report earnings on a quarterly basis. The uncertainty of results produces wild swings and requires the market to re-price shares. We know that traders flee when earnings are released due to the perceived unpredictability of earnings. We think that's a mistake. By following the simple road map that we'll provide you here in following modules, you can make the unpredictable predictable, and therefore, tradeable. Why trade earnings? Everyone knows that earnings beats are overly rewarded while earnings misses get overly punished. This results in extreme volatility and explosive stock price moves both up and down, creating a unique trading opportunity with simple option contracts. Earnings player trades guarantee volatility by placing simple Call or Put option trades before the news is released and following the earnings player road map, we make the unpredictable predictable. Let me share two examples from our Earnings Player member service. Cummins Inc. (NYSE: CMI) First, Cummins, the engine maker recently reported earnings that disappointed the market and shares sunk. Put options bought, immediately prior to the news being released, gained a whopping 377%. Best Buy Inc. (NYSE: BBY) The electronics retailer reported earnings during a strong market sell off. If you recall, this was in August of 2015 when the major market indexes were

Our road map to trading earnings takes the unpredictable and makes it predictable, and therefore, tradeable. How do we do it exactly?

3 down in correction territory below 10%. Just a hint of good news in the report sent Call options higher by 352%. Why let Wall Street manipulators have all the fun when you can beat the Street at its own game. Earnings are inefficient. Our road map to trading earnings takes the unpredictable and makes it predictable, and therefore, tradeable. How do we do it exactly? First, we analyze the facts that are present at the time before the earnings are released. Cummins Earnings Trade In the case of Cummins, we knew that the company is a manufacturer of diesel and natural gas engines. In the summer of 2015, the American manufacturer was having difficulty due to the strong dollar. This was foreshadowed in the stock price. Investors sold Cummins shares expecting weakness in its earnings report, but did the selling go far enough?

Now, Caterpillar and Cummins are very similar companies.

4 Let's look at the headlines at the time. Cummins was set to report earnings. In the "Wall Street Journal," China lowers expectations. This is talking about Chinese economic growth slowing. A few days before Cummins released their report, Caterpillar slashed its profit view on weak demand. Now, Caterpillar and Cummins are very similar companies. It can be expected that Cummins was going to report similarly to Caterpillar, but we needed more information, so we go to the earnings estimates. For Cummins, estimates for 2016 were lower than profit estimates for We know that investors run from stocks showing negative profit growth. The option market was grossly underestimating the volatility of a move after earnings.

In the case of Cummins, on October 27th, prior to the market closing, before earnings were released, we could buy the October, week five, $113 strike Put option for around $2.20, or $220 per contract.

5 Put all this together and we have a Put buying opportunity in advance of Cummins releasing its earnings with the upside of 500% or more. Our downside risk in this case was limited to 100% of our capital. Thus, we have a positive expected value of this two outcome-trading event, but what's the trade to make? In the case of Cummins, on October 27th, prior to the market closing, before earnings were released, we could buy the October, week five, $113 strike Put option for around $2.20, or $220 per contract. With earnings trades, we isolate the event. We buy before earnings are released and we close the trade the next day. What happened in the case of Cummins? They did indeed miss their earnings estimates big time. The stock sold off at the open down 11%. That $2.20 Put option, we could sell an hour after the market opened for $10.50 for a gain of $830 per contract or 377%. Best Buy Earnings Trade What were the deep dive facts available to earnings traders before the news was released? Here in the case of Best Buy, we had one of the largest retailers of

were sold just like the rest of the market and sold hard.

6 technology products, but also, big appliances that go in the home. As I mentioned, in August of 2015, the market was in a horrible shape and Best Buy shares were sold just like the rest of the market and sold hard. Taking a deeper look though, we can see that the floor for Best Buy shares was $30. In fact, one year prior, in 2014, when Best Buy shares traded below $30

7 briefly, the company released earnings reports that were positive and shares took off. Could we expect the same thing in 2015? You bet we could, but we needed more proof, so we go to the earnings estimates. Best Buy was in the midst of a turnaround. Earnings released in the prior quarters were beating estimates. As you can see here, in the last quarter, the company beat estimates by eight cents a share. The quarter prior to that, the company beat estimates by 13 cents per share. These are big performance beats that we were going to expect again in future quarters. The economic data supported an earnings beat here. We had a strong housing market. Best Buy sells appliances and other goods that go in the home. We could expect based on a strong housing market that sales at Best Buy were going to be better than expected.

If we wanted more proof, we have durable goods orders that were strong and released in advance of Best Buy's earnings. How about Best Buy's valuation?

We had a valuation that suggested the stock was poised for gains as all that selling resulted in a single digit multiple of earnings valuation at a

8 If we wanted more proof, we have durable goods orders that were strong and released in advance of Best Buy's earnings. How about Best Buy's valuation? That was attractive too and supportive of an upside earnings beat. We had a valuation that suggested the stock was poised for gains as all that selling resulted in a single digit multiple of earnings valuation at a time when analysts were expecting Best Buy's shares to grow profits by double digits. At the money call options required only a three percent move in the stock to break even. That is ridiculous. We know that earnings trades tend to move

positive. What was the trade to make for Best Buy? We could buy the August, week four, $30 strike price call option for around $.

9 stocks by 5%, 10%, 15%, or even 20% after results, especially, if there's a big surprise. In this case, for Best Buy, an expected positive report could yield 300% to 400%, and the options with a maximum loss of 100%; again, we have a two outcome event where by the expected value was positive. What was the trade to make for Best Buy? We could buy the August, week four, $30 strike price call option for around $.93 cents or $93 per contract right before the close prior to earnings being released. What happened? Best Buy beat estimates by $.15 per share. That's a huge beat. Best Buy stock opened up 16.9%. What happened to our $.93 Call option? An hour after the market opened after earnings were released, those options could be sold for $4.20 for a gain of $327 per contract, 352%.

10 This was on a call option at a time when the market was selling off. In summary, earnings announcements create volatility. Most investors and traders avoid trading before or during earnings because of the unpredictability. By following the road map that we're going to give you here in our future modules, we make the unpredictable and make it predictable, and therefore, tradeable. In our next lesson, the volatility of earnings combined with the Earnings Player strategy of identifying earnings beats can lead to exponential profits. Let's move on to Module Two and learn the exact steps that you'll need to identify "Monster Earnings Trades" just like Cummins and Best Buy.

Traders Reserve Copyright All material in this report is, unless otherwise stated, the property of Traders Reserve, LLC. Copyright and other intellectual property laws protect these materials.

11 Traders Reserve Copyright All material in this report is, unless otherwise stated, the property of Traders Reserve, LLC. Copyright and other intellectual property laws protect these materials. Reproduction or retransmission of the materials, in whole or in part, in any manner, without the prior written consent of the copyright holder, is a violation of copyright law. A single copy of the materials available through this course may be made, solely for personal, noncommercial use. Individuals must preserve any copyright or other notices contained in or associated with them. Users may not distribute such copies to others, whether or not in electronic form, whether or not for a charge or other consideration, without prior written consent of the copyright holder of the materials. Contact information for requests for permission to reproduce or distribute materials available through this report is listed below: service@tradersreserve.com

Simple Trades, Monster Profits

Simple Trades, Monster Profits Module Four Earnings Trade Examples Jamie Dlugosch The Earnings Player Earnings Trade Examples Now that we've completed our training modules, let's put it all together. We