HOW IT WORKS
CNBC, Sept 30th, 2011 |
Prior to the release of the company's actual earnings number, there is 'speculation' about what that number will be. The mainstream media reports on the 'analysts estimate'. This number is the combined estimate of the analysts covering that particular public company.
WhisperNumber.com, however, provides investors with different type of earnings 'speculation'. The 'whisper number' is the combined earnings expectation of individual investors, floor traders, investment advisors, and market strategists for a particular public company.
Many investors believe that beating or missing the speculative earnings numbers have the greatest impact on stock movement. If the number is exceeded, the stock is rewarded and prices move higher. If the number is missed, the stock is punished and prices move lower.
But unlike the analysts estimate, the 'whisper number' from WhisperNumber.com has actually been
proven to have a greater impact on stock movement. In comparison, the analysts estimate has much less of an impact on stock movement.
This simply means a stock price is more likely to move higher when the company exceeds the whisper number, and lower when it misses. This is not an 'opinion' or a statement made based on an internal analysis. This is proven in the results of independent, university studies (
click here to view the studies).
The Analysis & Service
So we now know price volatility is (at least partially) due to a company exceeding or falling short of investor expectations (whisper number).
But we also know that not all companies react to beating or missing the whisper. Some companies always see positive price movement following earnings. Some always see negative price movement following earnings. And some just go whatever direction they please for that quarter.
WhisperNumber.com has put together those companies most likely to see price volatility according to whether or not they beat or miss the whisper. These companies have a high probability of positive price movement following the earnings report if they beat the whisper number, and negative price movement if they miss the whisper number.
Some companies will see the best price movement or 'price reaction' within one trading day. Others may see the best price reaction within thirty trading days. We've analyzed and found the best reaction timeframe for these high probability reactors. We've also analyzed best average price movement during that timeframe.
Options Data (for Pre and Post Earnings Strategies)
We then have
Options Research & Technology (ORATS) take these companies that are most likely to move higher or lower, and match the ORATS fair implied volatility expectation (forecast for implied volatility), the implied volatility calculated from the average of the bid and ask market quotes (implied volatility at-the-money), the target expiration month, and an overvalued or undervalued signal. With this data you can execute either a pre or post earnings strategy (based on the indicated signal) using the following guidelines:
Strategy for dates previous to earnings:
- If the signal is "Overvalued" choose a strategy with a neutral
directional bias and a bearish volatility bias.
- If the signal is "Undervalued" choose a strategy with a neutral
directional bias and a bullish volatility bias.
Strategy for dates after earnings:
- If the signal is "Overvalued" choose a strategy with the
WhisperNumber directional bias and a bearish implied volatility bias.
- If the signal is "Undervalued" choose a strategy with the
WhisperNumber directional bias and a bullish implied volatility bias.
Take Sysco (SYY) for example. On May 7th, 2012 Sysco reported earnings before market open and missed the whisper number. After their earnings report, ORATS data showed an implied volatility of 21%, but a forecast volitlity of 24%. We provided our clients with an 'undervalued' signal, indicating they choose a strategy with a bearish directional bias and a bullish volatility bias. While there are numerous strategies you could use, the most common would be a long put. The at-the-money put May 29 strike near the close was trading at .85 with the stock at 28.31. On May 10th, with the stock at 27.95, the May 29 put was trading 1.10 and our clients made a healthy profit.
A great resource that provides potential strategies and more information is the
Options Industry Council. This site will allow you to filter strategies by outlook on underlying, objective, and implied volatility.
Here is a partial screenshot of the data available on the product:
You can
click here now to get the Options Reactors service at just $699 for the next six months.
The Options Reactors service is a proven strategy to profit from earnings volatility - no 'secret formulas', no hidden claims, no small print, just pure analysis of price movement on our proprietary database of whisper numbers.
