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Anticipating Events

ANTICIPATING EVENTS: An important part of tracking open trades is keeping ahead of any upcoming events that concern the stock associated with your option trade. Any event that might have a significant influence on the stock price has the potential to produce a huge change in the price of a related option.

Of course, some events can’t be anticipated, but there are many that can be.  Perhaps the most important event for any stock is the quarterly earnings report, something we always review prior to putting on a trade.  As we approach the end of the second quarter (6/30), the performance of any trade we enter now will most likely be influenced by its own pre-earnings report buzz and even the general direction of earnings reports for the market and the industry related to the stock we’re trading.

Also, dates for stock splits and dividends are important. These dates are known well in advance and can be easily found on free web sites (for example, Yahoo! Finance). Less-common events such as a drug approval or a court decision may not have a specifically announced date, but the likely time may be known within a couple of weeks.

If you are tracking your trades as suggested, you should enter the important dates as part of the log process.