Every three months I get excited and ready for the commencement of earnings season, the highly anticipated time of the year when company fortunes rise and fall according to a little number we call EPS. Actually, if we take a deeper look into stock price fluctuations following earnings releases, the pivotal data has not been current EPS, but rather future revenue guidance.

Recent market volatility (the S&P 500 sold off 45 points on Fri. June 6th, accompanied with poorer jobs data and higher energy prices) could signal another volatile earnings season to come. Does anybody remember January through early April when the VIX traded in the 30's? Much of that volatility can be attributed to a disappointing earnings season. Alcoa symbol (AA) typically signals the beginning of the next earnings season, as it is the first Dow symbol to report. Look for the company to release results on July 7th. Currently, the implied volatility in AA July options is around 52%. I would imagine that volatility will rise as we get closer to the earnings date.

As we get closer to that date, I will offer up to you some basic earnings trading strategies. I will show you what traders look for in terms of gauging implied volatility, calendar spreads, straddles, and strangles. So, stay tuned...

Happy Trading

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