The quarterly earnings reports of large listed companies offer temporary price discovery windows that are too lucrative not to scalp, even if you are a hold-and-mold investor. Here’s how you can do it.*

You might have heard about scared and scarred investors sitting on their thumbs around corporate earnings since the price action is always seemingly irrational.  Company A reports a beat and the share price plummets, Company B reports the same and the share price skyrockets. But the irrationality is actually the reason we trade in public markets in the first place. Thriving on public stupidity is much easier than price negotiating with an informed salesman.

You can look at the earnings release as an auction where buyers and sellers are shouting out loud their bids for a good ten minutes.  As long as there are enough bidders (liquidity), these ten minutes will give you enough time to get in and out of the bank before the fair price is established.

The options market can provide clues about expected volatility around earnings. High premiums on options around the earnings date can indicate that the market expects significant price movement. After all it’s no use setting up traps around a very tight price range.

Along with high implied volatility and high trading volume (even if it’s multiple entries from the same algo-trading institutions), I suggest only trading in profitable companies that you understand. As boring as I am, I never use derivatives, only layered low-ball orders. Put it this way: If it’s a company that you anyway plan to invest in, why not buy additional shares when they are momentarily on sale?

But you won’t necessarily notice the bargain if you only follow main stream sources for stock exchanges. As an example, you can see the share price of NVDA skyrocket in the graph below after their earnings release earlier this week. But the graph does not show the quick price dip to USD 922 that took place a minute before the vertical line was drawn. (If you zoom in on your trading platform, you will see it.)

Your service provider is probably sending you reminders of upcoming earnings, but the exchanges also provide this information. Here‘s for instance the upcoming earnings for companies listed on the Nasdaq.

Practical example: Next Wednesday CRM reports after hours. Their P/E of 65.1 is obnoxiously high, but they can charge large companies extra for new AI features. If you are an investor already then why not consider placing purchase orders at 251 (x1), 226 (x2) and 221 (x4)?

* This is not financial advice.