TJ 144: Earnings and Becoming A Trader

Join Tim and Matt for their discussion about the impact earnings can have on stock price and the impact you can make on your own financial future by trading for yourself. Earnings is a challenging time to trade for everyone, new and old trader alike. Will your companies of choice beat earnings expectations? Will the market even react how you'd expect to the news? For new traders, that second question can be particularly vexing. If a company beats earnings, its stock should go up, right? Well, not during earnings. A solid earnings report can cause a short term dip in the stock's chart, while a less-than-stellar earnings report may cause a spike. Why? Essentially, low spooky action at a distance. That very unpredictability is why new traders are recommended to trade light around a particular company's earnings reports, and why strangle and collar trades (essentially trades that go well whichever direction a stock goes) are so popular around earnings time. If you're new to the concept of trading (or even to considering trading for yourself), even trading during non-earnings season can be daunting. It's your money on the line, after all. However: is it not also your money in that mutual fund that's likely barely pacing the market? The handwave of that kind of performance due to it being the professionals doesn't really go that far, either. If it's the professionals, why isn't it doing at least 3% growth every month instead of every year? That may seem like a small number, but do remember that investment accounts tend to be for the long haul (up to decades). That 3% this month may only be $20 this month, but if the funds are kept in the account, that same $20 will get added to the previous balance every month. Within years, 3% becomes living income every month. If that sounds like your jam, this episode is just for you.