We are all aware of the big Earthquake called the Coronavirus that has affected lives, businesses, restaurants, the economy and certainly the stock market.
But many investors are not aware of aftershocks that could also make them money. These aftershocks occur at regular intervals so we know they are coming.
These aftershocks can produce big gains (profit-taking opportunities) or big drops (buying opporunities) depending which way the motion goes. And every business has them.
I won’t keep you in suspense any longer. The aftershocks I’m talking about are the quarterly earnings statement each company puts out four times a year.
Most investors live for the short-term so they place great credence in these reports. Realize how the game is played and you can profit from it!
Analysts make estimates on what revenue and Earnings Per Share will be. Investors look at those analyst reports and compare them to the actual numbers.
If earnings and revenue are higher, then the stock can have a big jump. That causes the long-term options (LEAPS) to have an even BIGGER jump – sometimes a spectacular jump!
One quarterly earnings report caused IBM stock to jump 10% in one day. Pretty good, huh? Well the IBM LEAPS in my model portfolio jumped up 124% from $4.20 to $9.30 on the same report!!!!
That gave an instant sell and helped recover from the LEAPS dropping from $27.00 to $4.20. (For some that is bad but when you keep 50% of your portfolio in cash this was a great buying opportunity – which then made profits even bigger when the price rebounded for a sell – which they eventually do!)
I went from owning 6 contracts to owning 31 contracts – buying many when IBM LEAPS contracts were selling at $3.20 & $3.50. So when IBM stock had the 10% gain and the LEAPS had a 124% gain, I now had 31 contracts to benefit from that gain.
Remember that an investing portfolio that uses AIM has both your investing vehicle (a stock or an option contract) AND CASH. In this example here are the details:
The Portfolio Value with a LEAPS price of $3.50 was $5,250 of LEAPS + $11,418 in CASH = $16,668
With a 124% increase in the LEAPS the Portfolio Value was now a LEAPS price of $9.30 creating $29,760 of LEAPS + $5,548 in CASH = $35,308.
That is a 112% gain in your total portfolio value!
It is proof yet again that AIM provides a logical and systematic way to profit from the inevitable ups and downs in the markets. We know that these swings are likely 4 specific times a year – every time the quarterly earnings reports are released.
So be aware of quarterly earnings report timing. As I write this at the end of April 2020 we are getting all of First Quarter 2020 reports. Everyone is expected to make predictions for the next quarter – the worst of the pandemic. But who can possibly be expected to predict it accurately?
Smart investors will set themselves up to profit from the inevitable aftershocks that will come 3 months from now with the next set of quarterly earning reports. Get yourself set up with AIM and LEAPS so you will profit no matter which way the aftershocks move. If you want help from someone who has been doing this for over 30 years that’s why I am here for you.
Disclaimer: Jeffrey Weber is not an investment adviser and gives only his personal view and opinion, never making any investment advice or recommendation to buy or sell specific securities. Investors in financial assets must do so at their own responsibility and with due caution as they involve a significant degree of risk. Before investing in financial assets, investors should do their own research and consult a professional investment adviser.