Earnings season is back, and this week, we’re focusing on the financial heavyweights that set the tone for the broader market.
BlackRock (BLK), Citi (C), JPMorgan (JPM) and Schwab (SCHW) all report earnings in the coming days, and their results could ripple across the S&P 500.
For traders, these events are prime opportunities to capitalize on volatility — if you know what to look for.
Why Earnings Volatility Matters
Earnings reports often act as short-term catalysts, driving significant price movement in the days surrounding their release. Whether it’s a surprise beat or an unexpected miss, the reaction can present clear trading setups.
The key is to approach these plays with a strategy that accounts for implied volatility, liquidity and market sentiment.
This week, big banks are at the forefront.
These companies tend to be more insulated from extreme earnings swings compared to high-beta names in sectors like Technology or Consumer Discretionary.
However, they still generate enough movement to make worthwhile trades — especially when paired with the right strategies.
Trading Strategies for Earnings Plays
- Focus on Liquidity Levels
When trading earnings, liquidity is king. Stocks like JPMorgan and Schwab are known for their tight bid-ask spreads and deep options markets. This makes it easier to execute trades without excessive slippage, which is critical when trading short time frames around earnings reports. - Implied Volatility Crush
Implied volatility (IV) tends to spike leading up to earnings but quickly deflates after the event. One way to trade this is by selling premium ahead of the announcement — such as with a credit spread or an iron condor. These setups allow you to take advantage of the IV crush while limiting risk. - Directional Moves with Ratios
For directional trades, consider a ratio spread. For example, if you expect Citi to rise after earnings, you could buy a closer-to-the-money call while selling two higher-strike calls. This trade keeps your upfront costs low while offering attractive upside if the stock moves favorably. - Post-Earnings Drift
Even after the report, there’s still opportunity. Studies have shown that stocks often trend in the same direction as their initial earnings reaction for several days. This post-earnings drift can be an excellent setup for momentum traders.
Key Levels to Watch
Look for pivotal support and resistance zones going into these reports. For instance, keep an eye on Schwab’s pre-earnings range to see if the stock consolidates near major moving averages.
BlackRock’s reaction to earnings could also provide clues for the broader Financials sector.
Earnings season isn’t just about placing bets — it’s about positioning yourself with high-probability trades. Whether you’re selling premium ahead of the event or riding post-earnings momentum, stick to strategies that balance risk and reward.
With banks leading the charge this week, the Financials sector is the place to watch for actionable setups.
Stay sharp out there, and keep those levels in focus.
I’ll see you in the markets.
Chris Pulver
Chris Pulver Trading
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