A 5 Step Plan for Trading Earnings
While many traders tend to avoid trading earnings due to the high level of gap risk there can be some great opportunities for a trader who is using a systematic and methodical trading plan. Here we will go over 1 trade setup in Discover Financial Services (DFS) using a plan for earnings trade analysis. The plan has only 5 steps and is a great way for traders to analyze and trade options spreads in stocks ahead of earnings. Trading Earnings simplyfied.
The DFS Setup:
Discover Financial Services (DFS) stock was trading around $48.40 going into the release of earnings. To determine the suitability of this symbol for an options trade we will look at 5 different key metrics.
- Historical Movement
- Implied Movement
- Measured Move Targets
- Trade Risk and Reward
Each of these key points will give us useful information on how to trade the symbol or if we want to trade it at all. Let’s break down all of these key data points for DFS as they set up before the release of the earnings report.
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