Why I Love Ugly Charts and Trading Earnings

by | Jul 15, 2022 | Options

Earnings season is back and let me tell you — I am here for it!

For the uninitiated, the reason earnings season is so important for everyday traders like you and me is that stocks tend to make bigger moves four times a year — typically around earnings events…

And combining those moves with the power of short-term options trading can help put us in a position to capture outsized returns.

If you were around for my earnings edition of my Unusual Options Secrets Workshop this Thursday, then odds are you know exactly what I’m talking about…

Because after what happened Friday morning, I may have to take back some of the things I’ve said about boring bank stocks thanks to a fantastic options play on Wells Fargo…

Wells Fargo Continues Buyback Program, Sends Earnings Options Play Into Orbit!

For me, earnings season doesn’t officially kick off until next week when big tech like Netflix Inc. (Nasdaq: NFLX) and Meta Platforms Inc. (Nasdaq: META) step up to the plate…

But to get everyone into the earning mood, I had to work with what the market was giving us — boring bank stocks.

Under most circumstances, you’re not going to find me trading banks or financial names because these are solid businesses with an army of top-shelf executives and bean counters who keep their performance in line with expectations …

In order to see a big shake up from earnings in the major banks, you’re going to need big shocks to the bigger economic picture… Which is exactly what happened over the second quarter.

On Wednesday, financial fat cats like JPMorgan Chase & Co. (NYSE: JPM) and Morgan Stanley (NYSE: MS) both missed earnings thanks in part to a downturn in investment revenues in Q2…

The poor results helped set the stage for one of the most-hated big banks to surprise market makers…

If you’re looking for a big bank with a bad chart, I present to you Wells Fargo & Co. (NYSE: WFC)’s chart…

And that bad rep and ugly chart played into our favor heading into WFC’s report. Let’s just say expectations were not high…

So when Wells Fargo announced it would continue to buy back shares, that small glimmer of positive news helped the stock rally as much as 6% during Friday’s session despite another earnings miss.

During Thursday’s workshop, I singled out a trade on the WFC July 15 expiration, $38 strike calls trading around $1.

And when the stock took off Friday morning, so did the options*…

So if any of you out there bagged this trade, hit me up at lance@newmoneycrew.com and let me know how you did because I want your autograph!

This shows why I prefer to focus on short-term moves and focus on flow and technicals over fundamental analysis. You can pretty much throw P/E ratios and EBITDA out the window if you’re only holding positions for a day or two. 

Check out the clip from Thursday’s workshop and see the Wells Fargo earnings options play up close!

And to find out how I trade “Shadow Blitzes” like these through earnings season, check out my Weekly Blitz Alerts strategy!

* Not indicative of any future results. Trade at your own risk.

WRITTEN BY<br>Lance Ippolito

WRITTEN BY
Lance Ippolito

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