Why Trading Energy Earnings Is a Trap You Can’t Afford to Fall For

by | Apr 18, 2022 | Options

I don’t know if families took a long holiday or because it’s Tax Day, but Monday’s order flow is almost non-existent.

I have to be honest — I’m a little shocked by the low trading volume since we’re getting ready for some big names to report earnings this week…

And this may prove to be the most important earnings season we’ve seen since the start of the pandemic with things being as close to “normal” as we’ve seen in some time. 

In addition to all of the inflation fears, COVID-19-related supply chain issues and war-time disruptions, year-over-year comparisons are getting tougher for everyone.

Markets have been thrown around with all of the negative news so if earnings can’t at least hold serve, we could be in for a lot more volatility.

Now, while I love trading earnings, that doesn’t mean every sector and business getting ready to report is worth your time or money.

And that goes for the strongest sector on Wall Street the past few months: Energy.

We’ve heard a lot about the energy crunch driving big moves in oil and gas over the past several weeks…

But if you think I’m going to trade energy names for earnings, you’ve got another thing coming…

Why I’m Not Trading Energy Names for Earnings

Since the start of the fighting in Ukraine, oil prices have been blown all around the market by news-driven volatility.

One minute we’re hitting multi-year highs and the next, prices drop 20% because of a new COVID-19 lockdown.

Traders need to know that those headlines will have more of an impact on energy share prices than the earnings themselves.

We’ve seen a big run in energy prices — just look at the Energy Select Sector SPDR Fund (NYSEArca: XLE)…

What everyday retail traders need to keep in mind is that the stock market is a forward-looking instrument.

The expectation is that these prices will be higher over the next few quarters for companies like Halliburton Co. (NYSE: HAL) and Schlumberger Ltd. (NYSE: SLB).

That means Wall Street expects these companies to put in strong reports — which means the move is already baked into the price for traders as the energy names release earnings results.

And if we as options traders want a shot at making outsized gains from earnings plays, traders should look to other sectors outside of energy for opportunity.

We’re seeing a few earnings bets hit the Blitz Tracker Monday including AT&T Inc. (NYSE: T) and Snap Inc. (NYSE: SNAP).

Snap isn’t a ticker we see hit the scanner often these days… So it will be interesting to see if any of the Twitter Inc. (NYSE: TWTR) hype can build some momentum for other social media stocks like Snap, which is down 47% from a year ago… OUCH!

P.S. Corporate insiders raked in a record-breaking $69 billion in trading returns in 2021… 

It’s led many to believe these huge gains made by top-ranking corporate executives have spiraled out of control. And for good reason…

If you’re one of the many American investors who feel cheated, you’ll want to check out what I have to say… 

I believe this $69 billion spiral is one of the best opportunities in the stock market… if you know how to play it, of course! 

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WRITTEN BY<br>Lance Ippolito

WRITTEN BY
Lance Ippolito

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