I went into last week’s earnings lineup ready to hunt for high-probability trades — but sometimes, no matter how much you want a setup to work, the numbers just don’t justify the trade.
That was the case with a handful of names that just reported: Snowflake (SNOW), Deckers (DECK), PDD (PDD) and Target (TGT). All of them had something interesting at first glance — decent average moves, good volume or earnings timing that fit my window.
But when I priced them out, they fell apart.
When Expected Moves Don’t Line Up
Target was the first red flag. The market priced in about an $8 move, but its 10-day average move was closer to $13. That might sound like a good thing — a chance to buy volatility — but Target barely ever hits its expected move.
I ran the data. Way more often than not, it misses. So if I had tried to sell premium or structure a neutral trade, I’d have been on the wrong side of the odds.
Snowflake was no better. The expected move was about 9%, but it only hit 16% about half the time. That left me in no-man’s land — not enough consistency to justify buying the move, and not enough edge to sell it either.
Deckers looked promising until I tried to structure a trade. No fills, no bid-ask quotes — just a dead options chain with no open interest. If I can’t build the trade, I walk.
Same story with PDD. It’s a China stock, and I already had exposure there, so I passed without even pricing it out.
When to Walk Away
This is why I stress the math…
I don’t trade off headlines — I trade off numbers. If I can’t get at least a 1-to-1 reward-to-risk ratio or better, and if the setup doesn’t stack in my favor, I skip it.
Sure, some of these names made moves after earnings. But I’m not here to gamble. If the pricing, the probabilities and the structure don’t align, I stay out. That’s how I protect capital and wait for cleaner setups.
Sometimes the smartest trade is no trade at all — and last week, that was the right move.
I’ll see you in the markets.
Chris Pulver
Chris Pulver Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
P.S. Is America Days Away From Economic Shock?
Did you see this headline from the Economist?
What “economic shock” are they talking about?
Well, it’s coming next Thursday… and it’s why I’m joining a LIVE roundtable panel with six other experts at 1 p.m. ET on Wednesday to help you prepare for it.
Spots WILL be limited, so please RSVP here if you want to join us.
I’ll sit down with Kane Shieh, Roger Scott, Lance Ippolito, Nate Tucci, Graham Lindman and Jeffry Turnmire — what a group! — to bring you…
- Our expectations for where the markets will go after Thursday’s critical economic news.
- Our top stocks and markets to watch in the aftermath.
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Plus, I’ll debut my BRAND-NEW scanner, and a few stocks that I think are in “GO” zone right now!
Naturally, I cannot promise future returns or against losses, but… I haven’t been this excited for a market opportunity in a LONG time, so I hope you’ll join us!
You’ll even score a FREE watchlist from me…
