Earnings History – JP Morgan Chase and Wells Fargo 1Q2014

The first of the major US banks report their first quarter 2014 earnings this Friday.  On deck is JP Morgan Chase (JPM) and Wells Fargo (WFC).

A lot of traders like to trade around the earnings reports because of higher than normal option prices.  These can lead to quick gains as well as quick losses.  So you better know what you are doing.  These are instant gratification trades, as once the news is out you will most likely know if you are making money or not.  So this is a case where you better have an idea of what might happen.

Well to help you trade rationally here are some statistics derived from the last few earnings reports:

If JPM closes today at $57.67

On average expect it to close between $56.20 and $59.10 by the end of the week.  If it goes according to the average, expect a $1.44 move in either direction by the end of the week.  Out of the past 14 times it has gone down in price 7 times.  If the largest change (up or down) over the past 14 earnings reports is repeated, expect a move more to the tune of $4.00 in either direction.

Perhaps this helps those option traders who like to buy or sell volatility around earnings.  If you are long or short the market in general keep in mind that 9 out of the 14 previous earnings reports, the S&P 500 or SPY has ended the week in the same direction as JPM has from the earnings report to the close of the week of the earnings report.  Something to consider if you have a position in the general market.  Coincidence, correlation, whatever.  Just be aware of the things that you might have overlooked.  Remember if you are a short term trader it doesn’t pay to be right. It pays to be right, right now.

For those trading Wells Fargo:

If WFC closes today at $47.91

On average expect it to close between $46.80 and $49.00 by the end of the week.  If it goes according to the average, expect a $1.10 move in either direction by the end of the week.  Out of the past 14 times it has gained 11 times.  If the largest change (up or down) over the past 14 earnings reports is repeated, expect a move more to the tune of $3.60 in either direction.

If you are long or short the market in general keep in mind that 11 out of the 14 previous earnings reports the S&P 500 or SPY has moved in the same direction as WFC has during the same time frame.

Good luck and trade rationally.

Market Commentary – April 7, 2014

Did the Friday Effect catch you long equities last week?  If you didn’t read last week’s comments you can do so here.  So far in 2014, Fridays have been bad for those long equity markets and this past Friday helped to continue that trend.  Do not allow fear to creep in and cloud your judgment by making you think a huge crash is coming.  Your energy is better spent on understanding how the market is evolving and what is the EASIEST way to trade around it.

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Game Theory and What the Google Split Means to You

April 3, 2014 is the first day of Google shares trading in two classes.  One class, Google – A class, will trade under the ticker GOOGL.  These shares will have voting rights just like most stock that you might purchase.  Incidentally, these shares are the current stock that investors hold.  So if you own Google stock you will retain your right to vote in their shareholder meetings.  You will be switched to the new ticker and given an equal amount of shares in the new (but old ticker) GOOG class C shares.  These C class shares do not have any voting rights.

Charts Courtesy of Yahoo Finance

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Market Commentary – March 31, 2014

Has the sideways trading in the S&P 500 frustrated you?  Perhaps it has saved you by keeping your mistakes manageable.  Maybe you have been selling options to sell volatility to benefit from this range bound trade.  Whatever the case hopefully you are not lulled into the trap of complacency.

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Market Commentary – March 24, 2014

Last week the markets were not as interesting as the US College Basketball tournament known as March Madness. Will this week be any different?

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Market Commentary – March 18, 2014

Beware of the ides of March, or in modern times beware of the news.  It is easy to get wrapped into the drama of news and make irrational trading decisions expecting extreme events to occur.  If you invest long enough you’ll come to realize that betting on extreme events more often than not leads to disappointing results.  Most often when you are correct the payoff does not always make up for all the losing trades along the way.  That is why we stress rational thinking here.  Would wagering a weeks salary on lottery tickets sound like a good strategy?  So how does this apply to the current events? Continue reading “Market Commentary – March 18, 2014”

Market Commentary – March 10, 2014

Now that daylight savings time has started, the extra sunshine should shed some more light on the markets.  After the latest US employment report, and continued news out of Ukraine, the equity market continued its march along to all time highs.  However the reaction was subdued.  The real action was in US Treasury Bonds.

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US Employment Report Preview – March 2014

This Friday the US jobs report will be the focus of the market.  Since most of the economic reports of late have blamed less than stellar results on the weather, traders are probably numb like frostbitten fingers by now.  A disappointing number will probably not surprise anyone.  The way the market has been behaving lately, bad news will be good for the market.  The risk may be that the number is much better than expected.  That may spark fear that the Federal Reserve Board may speed up the pace of reducing the bond buying program which has settled and helped the market take off the past few years.  With the market at all time highs, perhaps a good employment number will be the opportunity for traders to take profits and lead the market lower.  Only to take it back up later.  What matters is that you are prepared to ride the wave.

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Market Commentary – March 3, 2014

Are you ready for a busy trading week?  This week could turn out to be one of the more volatile trading weeks of the year so far.  Either be prepared to act swiftly or make sure you have a strong stomach.

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