Trading on Corporate Earnings News: Profiting from Targeted, Short-Term Options Positions

Hardcover | March 9, 2011

byJohn Shon, Ping Zhou

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Profit from earnings announcements, by taking targeted, short-term option positions explicitly timed to exploit them! Based on rigorous research and huge data sets, this book identifies the specific earnings-announcement trades most likely to yield profits, and teaches how to make these trades—in plain English, with real examples!

 

Trading on Corporate Earnings News is the first practical, hands-on guide to profiting from earnings announcements. Writing for investors and traders at all experience levels, the authors show how to take targeted, short-term option positions that are explicitly timed to exploit the information in companies’ quarterly earnings announcements. They first present powerful findings of cutting-edge studies that have examined market reactions to quarterly earnings announcements, regularities of earnings surprises, and option trading around corporate events. Drawing on enormous data sets, they identify the types of earnings-announcement trades most likely to yield profits, based on the predictable impacts of variables such as firm size, visibility, past performance, analyst coverage, forecast dispersion, volatility, and the impact of restructurings and acquisitions. Next, they provide real examples of individual stocks–and, in some cases, conduct large sample tests–to guide investors in taking advantage of these documented regularities. Finally, they discuss crucial nuances and pitfalls that can powerfully impact performance.

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From the Publisher

Profit from earnings announcements, by taking targeted, short-term option positions explicitly timed to exploit them! Based on rigorous research and huge data sets, this book identifies the specific earnings-announcement trades most likely to yield profits, and teaches how to make these trades—in plain English, with real examples!   ...

From the Jacket

“Trading on Corporate Earnings News is one of those rare, high-quality pieces of work that is destined to become an instant source of value creation for serious investors. Its greatest strength lies in linking actual statistics to market behavior and fundamental analysis. Serious investors who study the material will undoubtedly discov...

John Shon is Professor of Accounting at Fordham University’s Gabelli School of Business and Graduate School of Business Administration. He has received several teaching awards throughout his teaching career. Shon publishes extensively in academic journals and has received several grants and awards for his research on equity markets. H...

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Format:HardcoverDimensions:224 pages, 8.28 × 5.75 × 0.85 inPublished:March 9, 2011Publisher:Pearson EducationLanguage:English

The following ISBNs are associated with this title:

ISBN - 10:0137084927

ISBN - 13:9780137084920

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Table of Contents

Acknowledgments     xii

About the Authors     xiii

Preface     xiv

P ART I: I NTRODUCTION

Chapter 1: Introduction     3

P ART II: T HEORY : E ARNINGS A NNOUNCEMENTS AND E ARNINGS S URPRISES

Chapter 2: Earnings Announcements: Why Are They So Important?     13

Chapter 3: Earnings Surprises: Definition and Measurement     23

Chapter 4: Earnings Surprises: Empirical Evidence     39

PART III: E VIDENCE : M ARKET R EACTIONS

Chapter 5: Market Reactions to Earnings Announcements     49

Chapter 6: Market Reactions to Earnings Surprises (Are Full of Surprises)     57

PART IV: I MPLEMENTATION : O PTIONS T RADING S TRATEGIES

Chapter 7: General Characteristics of Optioned Companies and Options Behavior Around Earnings Announcements     71

Chapter 8: Practical Considerations Before Implementing Trades     77

Chapter 9: Directional Bets: Long Calls, Bull Call Spreads, Long Puts, and Bear Put Spreads    97

Chapter 10: Long Straddle and Strangle Strategies     111

Chapter 11: Short Straddle and Strangle Strategies     135

PART V: F INE T UNING : I MPROVING THE O DDS OF A P ROFITABLE T RADE

Chapter 12: Growth Expectations and the Torpedo Effect     153

Chapter 13: Revenue and Expense Surprises     161

Chapter 14: Earnings Surprise Persistence     167

Chapter 15: Other Theories and Evidence     175

References     189

Index     197