Simple Trade, Monster Profits

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Leslie Hawkins
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1 Simple Trade, Monster Profits Module THREE Earnings Trade Execution Jamie Dlugosch The Earnings Player

Earnings Trade Execution Before placing your first earnings trade, understand that trading earnings using options entails significant risk. You can and will lose money-trading earnings.

Before you make your first earnings trade, determine the amount of capital you are going to commit to the program. What should your capital base be? Risk only what you can afford to lose.

2 Earnings Trade Execution Before placing your first earnings trade, understand that trading earnings using options entails significant risk. You can and will lose money-trading earnings. Oftentimes, a losing trade will lose up to 100 percent of your capital in that position. Thus, you need a capital management plan when trading earnings. Before you make your first earnings trade, determine the amount of capital you are going to commit to the program. What should your capital base be? Risk only what you can afford to lose. You should be thinking in terms of only a percentage of your portfolio, and a small one at that. For example, one, two, five percent. Use this amount as your beginning capital base, and remember an allocation percentage should be what you can afford to lose. How much will you allocate to each trade? If you were to start with $5,000 of risk capital, for example, divide that number by 10 to determine how much to allocate to each trade. On a $5,000 capital base, that would be $500 per trade. If you are starting with a $10,000 capital base, that would be $1,000 per trade. If $5,000 Capital Base: Divide by 10 Equals $500 Per Trade Now that you have your capital management and allocation per trade made, it's time to go over the earnings trading rules. Remember, use simple call or put options only. We buy at-the-money options with the nearest to expiration date as possible.

By using at-the-money options, we can isolate the earnings event. Longer expiration dates enter into the equation new variables that will dilute the trading opportunity.

3 By using at-the-money options, we can isolate the earnings event. Longer expiration dates enter into the equation new variables that will dilute the trading opportunity. Nearest expiring options will have the lowest time premium. Thus, we are isolating the earnings event, with the added bonus that at the money options give earnings traders the benefit of a dollar for dollar move in share price. When do we place our earnings trade? It's based on the earnings report. Earnings reports by companies are usually made within the hour after the market closes or within the hour before the market opens.

Thus, you are going to place your earnings trade in the last hour, around three o'clock Eastern, before the market closes, prior

As for closing your earnings trade, we close our winning trades one hour after the market opens the next day.

Here are some best practices that I've learned over the many years of trading earnings.

Don't bet the house on that one big trade that you think will surely win. Chances are, it will not.

4 Thus, you are going to place your earnings trade in the last hour, around three o'clock Eastern, before the market closes, prior to the evening or morning the earnings report is being released. As for closing your earnings trade, we close our winning trades one hour after the market opens the next day. This one-hour allows the market to adjust the valuation, incorporating the new earnings and guidance into the price of the stock. Here are some best practices that I've learned over the many years of trading earnings. Starting with, "Don't cherry pick your trades." You don't want to bet your entire capital allocation on one earnings trade. Don't bet the house on that one big trade that you think will surely win. Chances are, it will not. Stay consistent with your plan, win or lose. Do not deviate. As for closing losing trades, we let those losing trades run to expiration. Sometimes the market takes time to align properly with your option trade. It could be a day. It could be a few days. Whatever the case, if you are facing a

5 losing trade, we'll now target 50 percent return on capital as your new goal for the trade. The worst case scenario of letting a trade run is that it expires worthless, a risk we've already accepted when making an earnings trade. A warning, earnings trading is addictive. You're going to want to make trade after trade after trade after trade, especially when you get that rush of a big gain earnings trade of 500 percent or more. Don't make too many trades. I'm going to use poker as my analogy. Most professional poker players know that the optimal number of hands to play is 20 percent. They don't play 100 percent of the opportunities. The same is true for trading earnings. My experience has shown that making around 25 to 30 trades per quarter will maximize your profit opportunity. Now you are armed with some best practices and the rules for trading earnings. In the next module, we'll actually go through a live trade example to help you get started trading earnings.

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.

6 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

5 Simple Steps to Finding Monster Earnings Trades

5 Simple Steps to Finding Monster Earnings Trades Module Two, Lesson 1 IDENTIFICATION Jamie Dlugosch The Earnings Player Step One: IDENTIFICATION Let's start with identification. This is where it all begins.