In a previous post I talked about how today was the day that kicked off the release of earnings for the FAANG stocks – Facebook, Apple, Amazon, Netflix and Google (Alphabet). With the release of their Q2 earnings today, Netflix launches what may probably be a volatile couple of weeks for the NASDAQ 100 index.
I personally do not day trade individual stocks and I have not ventured to learn how to trade options as of yet. As a futures trader, trading an earnings release presents a whole new risk variable and if you do not know how to handle that risk, it’s probably just best to stay out of the market on a day like today.
How I Prepare For An Earnings Release
One of the first things I do when heading into an earnings release is to look at the chart for the entire day on the date of the last earnings release. The image below contains all of the price action of the NASDAQ 100 Futures (NQ) on April 16, 2018 which was the date Netflix last reported their earnings.
The daily range on this date spanned about 80 points, all of that occurring during the regular trading hours of the U.S. session. Netflix reports after the close of the cash market and as you can see, the range for the period after the earnings release is almost 40 points or 1/2 of the total trading range for the day. That is some nice volatility!
In trading the cardinal rule is that “past performance is no indicator of future results”, and while that is absolutely true, it is a good place to start. Personally, I will be flat on futures heading into the release. Having an idea of how the market is going to react throughout the trading day could be very useful in my analysis. I can’t wait to see how this day plays out!
…to be continued