Frequently Asked Questions
Q: Could you share some of the trading disciplines you use in managing your holdings heading into a company's earning announcement? What are the determinants on whether you hold or close a position for an announcement?
A: There are numerous permutations that can occur such that we maintain flexibility with whatever the market throws at us. If a stock were to issue a pocket pivot the day before earnings, that's a sign of strength. If a stock were to have a nasty high volume reversal the day before earnings, we would probably close out the position on that day.
That said, the best way to get a better sense of how to handle a stock the day before earnings is to continue reading the FAQs and reports as we do discuss such occurrences from time to time. Also, if we have little to no profit in a position going into earnings, we make sure our accounts can withstand a gap down in the stock should that occur, thus we position size accordingly.