Four times a year, something extraordinary happens in the markets.
Every publicly traded company in the U.S. — from megacap tech giants like Apple (AAPL) to tiny biotech firms you’ve never heard of like Zymeworks (ZYME) — is required by law to step into the spotlight and show their hand.
They release their quarterly earnings reports. They tell us how much money they made, what’s working, what isn’t, and what they expect for the months ahead.
And almost without fail, these announcements trigger the biggest stock moves of the year.
For a few short weeks, the entire market becomes a minefield of potential explosions — some positive, some catastrophic. Stocks gap up 20% in a day. Others collapse overnight. Implied volatility spikes.
Emotions run hot. It’s fast. It’s noisy. And for most retail traders, it’s a gamble… Why?
Once you understand the structure of earnings season—these fixed, unavoidable catalyst events that affect nearly every stock in the market—you’re left with a choice: How do you actually trade it?
And that’s where most traders lose the plot entirely. Allow me to explain…
There Are Two Ways to Trade Earnings — Only One Has an Edge
The first approach most traders take is obvious: they bet on direction.
They read the news. They watch CNBC. They make their best guess — Will this stock go up or down after the report? And then they place their bet.
The problem? Even if they’re right about the company’s performance, they often still lose money.
The options market already knows there’s an upcoming catalyst. The expectations are already priced in. So the smart money hikes up the implied volatility for options around that date.
True, the stock could still pop higher in the short term. But if it doesn’t move outside of the range the market makers are expecting, the options will still lose value.
That’s not a calculated strategy. That’s a roll of the dice.
The second approach is the one I always take: I trade the pricing of the event itself.
Instead of betting on whether a stock goes up or down, I look at how much the options market expects it to move — and I compare that to how much it’s actually moved in the past.
Options are priced to reflect expected volatility. When those expectations are too high or too low — compared to what the stock usually does — opportunity opens up.
Now, let me pause here for a second and give you some background…
I didn’t come to this approach by accident.
For a long time, I was that trader betting on direction rather than volatility. Every earnings season was the same story. No spectacular returns. Just frustration.
But that all changed in 2011…
That’s when I was working as a partner at a proprietary trading firm. And I was surrounded by traders who weren’t guessing at all.
They were looking at implied volatility and historical movement like hawks. They used pricing discrepancies as their edge.
It wasn’t until I started asking the pros how they were approaching these events that everything clicked.
They weren’t trying to predict the future. They were identifying whether the market’s current expectations were right or wrong.
That insight changed everything for me.
Diving Into My Earnings Season Master Class
Here’s the major takeaway: It became the basis for how I trade earnings to this day — and it’s the foundation of what I teach inside Earnings Advantage.
This past week, inside Masters in Trading Live, I walked traders through exactly how I approach earnings season… Not with gut instinct. Not with predictions. But with data, with discipline, and with a method that’s been delivering consistent results for over a decade.
It’s all in my Earnings Season Master Class. And this week, I showed exactly what trading earnings like a pro looks like. Let me explain…
KTOS: The Drone Stock Flashing Serious Warning Signals
We started with KTOS — Kratos Defense & Security. A drone company, heavily in the headlines lately, and set to report earnings soon.
Now, if you’re a typical retail trader, you look at that setup and think, this thing’s going to fly...
But I pulled the numbers.
Over the last six earnings announcements, KTOS has moved an average of 10%. But the options market? It was pricing in more than 15%.
That’s a problem.
When the market is pricing in 15% of movement, and you know the stock has only moved 10% on average — where’s the edge?
There isn’t one.
The options are simply too expensive. And it doesn’t matter how “hot” the company is or what the headlines say — if the pricing is off, I’m out.
Because I’m not guessing direction. I’m measuring expectations.
What the stock will do is only half the battle. The other pieces of this equation are what the market thinks it will do — and whether that belief is mispriced.
With KTOS, it was overpriced. So we walked away.
Of course, KTOS is just one of the drone stocks I’m watching right now. And while that setup didn’t prove actionable for us. However, that setup in KTOS helped me kick off a whole series of lessons aimed at getting you into the earnings season mindset.
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On Tuesday, we turned our attention to MP Materials (MP).
It’s a name we’ve tracked for a while — especially with the rising attention on rare earths and the role companies like MP play in the national security and clean energy narrative. In fact, it’s exactly how we spotted the MP Materials setup that netted Advanced Notice members gains of more than 534% and 700%.
Our Discord chat lit up like the 4th of July on fast forward as members locked in triple-digit gains on both legs of the trade:
Not only did we just close out the second of those two massive options wins, but MP had earnings coming up as well.
I showed readers the basics of spotting mispriced stocks using implied volatility. And I showed exactly how that approach has informed our biggest success stories in Masters in Trading.
We ran the numbers and just like KTOS, MP’s options were pricing in a move far larger than what history supported. Over the last eight earnings cycles, MP had averaged a 9% move. But the options market? It was pricing in over 20%.
Again, too expensive. Again, we passed.
This demonstrates one of the most powerful skill a trader can learn: Patience.
Not every setup is going to give us the edge we’re looking for. You need to recognize when the odds are actually in your favor before committing your hard-earned cash on a trade. So when a lead doesn’t pan out — don’t panic. Take a beat and keep looking until you find a trade worth taking….
A Textbook Edge in an Unlikely Target
After coming up empty-handed on our earnings setups with KTOS and MP, on Wednesday, we finally found what we were looking for in the unlikeliest of places…
Once known for pioneering the group-buying craze and offering steep local discounts on everything from spa treatments to sushi, Groupon (GRPN) built its brand by connecting consumers with deals in their area. But over the years, the buzz faded. The company never quite kept pace with changing consumer behavior or mobile-first competitors.
Today, it still operates as a digital marketplace for local services and experiences — but it doesn’t get the kind of attention it did a decade ago. That makes it easy to overlook… and precisely the kind of name that can catch the market off guard during earnings season.
Groupon may not grab headlines like the hot tech stock it used to be, but the opportunity was real — and the pricing was off.
We pulled up GRPN’s earnings history and found that, on average, the stock tends to move significantly after its reports — sometimes 15%, 18%, even 20% or more. That’s the kind of movement we’re looking for.
But here’s the kicker: the options market was only pricing in a single-digit move going into the next report.
That disconnect between historical movement and implied movement? That’s mispriced volatility…
And that’s where our edge lives.
For the first time all week, the numbers lined up. Historical behavior supported the trade. The market was underestimating the move. And we had a rationale we could stand behind.
That’s when we added GRPN to the Masters in Trading Live free portfolio — and used it as a live example of how we apply this earnings strategy in real time.
Not based on headlines. Not based on hope. Based on data, structure, and a repeatable process.
Same Setup. Same Rules. Real Results.
Every day this week, we applied the same process.
We asked:
- What does this stock normally do on earnings?
- What’s priced in right now?
- Is that expectation too high, too low — or just right?
- And is there a good reason to be involved?
The answer didn’t have to be yes. In fact, it usually isn’t.
But when the answer is yes — when the edge is real — that’s when we move.
This approach isn’t hypothetical. It’s documented. It’s tracked. And it’s working.
Those aren’t paper trades. That’s not curve-fitting after the fact.
That’s the real performance of a strategy built on data, not predictions.
So if you’ve ever been frustrated by earnings trades that looked right but went wrong…
If you’ve ever been confused by how a stock can beat earnings and still fall…
If you’re ready to stop guessing and start thinking like a market maker…
The full week of these MIT Live sessions is up on YouTube — free to watch. If you haven’t already, head on over to my YouTube channel, subscribe and ring that bell icon so that you get notified every time we’re live or a new video is posted.
This week wasn’t about making one big call. It was about giving you a framework — a mindset — that you can apply again and again, earnings season after earnings season.
Because the market will always give you movement. The only question is: will it be priced correctly?
If it’s not, and you know how to spot it — that’s where the opportunity lives.
Remember, the creative trader wins,
Jonathan Rose,
P.S. I’ve always said the edge goes to traders who use time to their advantage — who know when the move is likely to happen, not just what to trade to gain a clear, repeatable edge.
TradeSmith CEO Keith Kaplan takes a similar approach — but instead of earnings dates, he’s found specific periods of time where stocks historically jump year after year. On Tuesday, he’s revealing why July 30 could be the biggest one of them all. If you want to see how his “Green Day” system works — and get two free picks — you can sign up here.
