No matter how carefully you plan your investing strategy, there will always be times of uncertainty that can catch you off guard. But quarterly earnings seasons don’t have to be among those times.
Depending on your style of trading or investing and the instruments you use, earnings reports may affect your positions. But many investors can benefit from the calendars and tools that are available to help you track and analyze company earnings.
Before we get to those tools, let’s break down the different types of investors and how earnings may factor into their strategies.
Short-term and day traders. In theory, if you day trade, you’re always flat at the end of the day, having no open positions, so earnings announcements might not directly affect you—unless you specifically seek out earnings releases as a reason to trade a certain stock. Many day traders look for volatility, which is dramatic short-term price change, so it can be good to know when earnings-related volatility might be present in a stock.
Short-term traders—those with holding periods from one to three days—could potentially get stuck with an open position going into earnings, so attempting to avoid those scenarios by checking an earnings calendar can be a plus.
Long-term and “buy and hold” investors. If there’s any group of investors who may be least affected by earnings announcements, it’s likely this one. By definition, long-term investors are less concerned about short-term volatility in their stocks because their investment time horizon can be quite long, and they’re counting on that to smooth out returns over time.
When a long-term investor might be interested in earnings is when it comes to tracking the trend. For example, one downside earnings surprise may not be worrisome, but several in a row might signal a decay in the underlying fundamentals of a stock and cause you to revisit your investing objectives. Trends in earnings growth might signal that it’s time to pare down a position—or maybe add to it.
Options traders. Some options traders base their strategy around volatility—like the volatility that can surround earnings. Premium sellers - those who sell options for a credit - would typically want to know when earnings announcements will occur, and they’d probably want to view estimates on the range of post-earnings moves. But short-term earnings traders—especially those who trade weekly options—could also find this information valuable.
Intermediate and swing traders. This group typically stands to be impacted most by earnings announcements. With trading strategies that range from a few days to a few weeks (or longer), these traders may run a higher risk of holding an open position going into earnings than day traders, and don’t have the extended time frame of long-term investors to smooth out any bumps in the road.
As we’ve seen, many types of investors may benefit from knowing when earnings reports are scheduled for a particular stock, and some can attempt to use fundamental and historical earnings info to their benefit. TD Ameritrade clients can access earnings calendars and other tools on the TD Ameritrade website and the thinkorswim® trading platform.
On the TD Ameritrade website, log into your account, click the Research & Ideas tab at the top left, and then select Calendar under the Markets subhead. You’ll be taken to a monthly calendar that lists the number of earnings announcements expected on any particular day. By selecting a day and clicking the link to the right of the calendar, you’ll see a list of earnings by company. Click any symbol to access a wide variety of technical, fundamental, and historical earnings information.
On the thinkorswim platform, you can access an earnings calendar by clicking the MarketWatch tab and then selecting Calendar. Want to drill down on earnings for a particular stock? In the thinkorswim platform, click the Analyze tab, then Earnings. There you can see earnings information on individual stocks, including:
- Historical price reactions after earnings.
- The relationship between implied volatility (a stock's estimated volatility) and historical volatility (a stock's actual realized volatility) at the time of earnings.
- Post-earnings at-the-money straddle movement. Note: An at-the-money straddle is a put and call option with the same expiration date and strike price, with the underlying stock currently trading at that strike price.
- Historical as well as current consensus earnings from Wall Street and Estimize.
Ultimately, however you approach the stock market, knowledge is power. With the calendar tools available on TD Ameritrade and the thinkorswim platform, you can attempt to be in the know when it comes to earnings season, and can potentially use that information to your advantage.
All investing involves risk, including the possible loss of principal.
Take Your Earnings Research to a New Level
The new Earnings Analysis* tab on the thinkorswim® platform gives you earnings history, consensus estimates*, volatility and more in a single-snapshot view.