Earnings Season & ETF’s

Earnings Season Preview - 

As we begin earnings season, our team at The OptionWiz looks to Exchange Traded Funds to mitigate some of the risk that Individual stocks carry during this period.

Making a call on which way a security is going to move following quarterly earnings is a risky game. Therefore, we suggest taking a broader stance on investment decisions during this period, trading ETFs.

There are many ways to play earnings & ETFs. One way we like to participate is to determine whether or not a stock is going to have a substantial move in the days surrounding its quarterly report.


Google is reporting earnings on Thursday and while we don’t have a good handle as to whether it will go up or down (based on the report), we can trade a technology ETF and wrap an options strategy around it.

We do believe that Google’s number will move the tech sector. Therefore, we will trade XLK (Amex Spdr Technolody Select Index).


Stock / Symbol: AMEX SPDR Technology Select Index / XLK

Price at trade: $29.53
Option Strategy: iron condor

Reasoning: This trade is designed to profit with at least a 4% move up or down in the XLK from it’s current price by May expiration (5/18). If we haven’t moved beyond the breakeven points in the trade by the first of May, we’ll exit the trade to protect against further losses.

Risk Profile:
Max Risk: $590
Max Reward: $410 or 69% @ $0 to $28 or $31 + by May 18
Profit Range: $0 to $28.40 and $30.60 +
Suggested Stop: if not in profit range by May 1st, exit trade.

Trade Details:
BTO 10 XLK May12 30 call
STO -10 XLK May12 32 call
BTO 10 XLK May12 29 put
STO -10 XLK May12 28 put

for a net debit of $0.59 per contract (day order, limit order. Don't pay more than 64c for this spread)

Did You Know

There are currently $1.4 trillion dollars in ETF’s worldwide and $954 billion of that is in U.S.-based funds. The overall market for Stock, bond and commodity markets worldwide is estimated to be $130 trillion dollars, with traditional stock and bond funds representing only $9 trillion of the total.

We use ETF’s to hedge our portfolio, make sector calls, and avoid individual stock blow-ups.


  • No need to be an individual stock picker
  • Don’t need to worry about earnings (although a big company that is about to report earnings in a particular sector which you have purchased an ETF could potentially move the ETF)
  • Great hedging vehicles
  • Safety of a mutual fund without the expense


  • ETF’s will underperform some individual stocks
  • 3x ETF’s are highly volatile
  • Some ETF’s do not correlate to their underlying assets as perceived

Trade Smart,

The Wiz

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