Microsoft had a 29-point expected move going into its earnings report.
The stock jumped 16%, its biggest day since October 2008, and added roughly $450 billion in market value. That is the largest single-day gain any stock has ever posted.
A lot of traders sat short through it anyway, and some of them aren’t trading anymore.
That’s not hindsight. The 29 was published. It was sitting right there for anybody who bothered to look, and it told you exactly what you were walking into.
Most people never look. They pull up a chart instead, and I’m telling you the chart is worthless the second a company reports.
One number decides whether you can carry a position through earnings, and it gives you three possible answers.
Screw the chart. It’s useless on earnings.
I don’t care what pattern you found or how clean the setup looked yesterday. A company reports and every one of those lines gets overwritten in one print.
The expected move is what drives it.
That’s the options market telling you how far the stock is priced to travel on the report. It’s published. You can pull it up in about four seconds.
Then you do one thing with it. You ask whether you can absorb that move on the size you’re carrying.
That’s the whole decision. Not whether the stock goes up or down, because you don’t know and neither do I.
Don’t predict. Predicting is for idiots and you’ll blow your account out.
I ran this on three positions in one week and got three different answers.
The first had an $11.30 expected move. Eleven bucks makes me crap in my pants, so I got out and I ate a loss doing it.
The second had a $1.80 expected move. A buck eighty doesn’t scare me and it isn’t going to shake me out, so I stayed short. I still bought a put against it, because you hedge ahead of earnings, period.
The third had a $4 expected move, which meant the stock was going to 51 or 60 and I had no idea which one.
So I sold half and hedged what was left. Contained it to 25 shares, and the most I could lose was a hundred bucks.
Same rule every time, and it gave me a different answer every time.
Losses are part of this business. If you can’t accept that you need to quit, because you’re not going to make money on every trade. Nobody does.
What ends people isn’t the loss. It’s the position they carried into a report because the chart looked fine, and then the report moved twice what they were sized for.
I watch it happen every single quarter. Somebody buys a name near the highs, sits through the print with no hedge, gets margined out at the bottom, and their trading days are over.
The market won’t help you here either. Companies beat and get sold, companies miss and guide lower and get bought.
It’s weird and it’s hard to figure out, and that’s exactly why you don’t sit there trying to figure it out.
You size for the move that’s already priced in and you stop guessing.
So before anything you own reports, go pull the expected move and set it against what you’re holding.
If that number is bigger than what you can comfortably lose, you already have your answer and it isn’t a hard one.
That’s earnings season in a nutshell. And if you want the full playbook — how to pull the expected move, how to size around it, and how to hedge so you’re not gambling on a coin flip — I walk through the whole thing inside Genesis Cog.
The Masterclass covers it live. The alerts show you how I’m playing it in real time. And the next earnings cycle starts whether you’re ready or not.
Join the Founding 50 before the doors close.
That’s the name of that tune.
Professor Jeffrey Bierman
Creator of the Genesis COG System
