My #1 'Sweet Spot' Earnings Trade This Season

We're right in the middle of what I call the "sweet spot" of earnings season. It's that narrow window between late October and early November when thousands of companies report.

But not all of them are worth your time—or your money.

In fact, of the nearly 1,900 companies reporting over the next two weeks, one stands out as the best I've seen this quarter:

Alphabet Inc. (NASDAQ:GOOGL).

It has a 100% win rate over the last four earnings quarters.

And it's delivered an 85% average return in just seven days.

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How to Trade Earnings The RIGHT Way – And The Best Stock To Trade

If you've ever tried holding a position through earnings, hoping for a big profit, you probably know how unpredictable the results can be.

Even when a company beats expectations, the stock can fall. Option premiums often get crushed, and what was a winning trade can still end in a loss.

That's why I learned early in my over 30-year career to stop trading through the announcement—and start focusing on the window leading up to it.

By trading that build-up, you can use implied volatility (IV), instead of price direction, to stack the odds in your favor. 

And when I ran my scans through every optionable stock (a stock with options), GOOGL, by far, stood out the most. 

Here's what I found: 

• GOOGL is 4-for-4 on winning trades before earnings

• Buying short-term, at-the-money calls about seven days out is the most profitable strategy to use
• This strategy has delivered 68%, 113%, 98%, and 62% gains over the past four earnings quarters—an average return of 85%

So, if you're looking for a high-probability setup without having to bite your nails through earnings, here's what I'm looking at right now.

GOOGL is expected to report after market close on Wednesday, October 29. And remember, you want to trade that seven-day build-up to the announcement. 

That makes this week your optimal entry window.

And here's how to approach it, in three easy steps:

• Step 1: Look for short-term (7-day) at-the-money call options
• Step 2: Enter the trade mid-week (Wednesday is ideal)
• Step 3: Exit the trade before earnings—ideally the day prior

Your goal is to capture the IV ramp and sell into strength before the announcement

Now this is a time-tested setup—and one of the lowest-risk opportunities to use this quarter. But if you're trying to tighten the purse straps even more, there's another option you can use (pun intended):

Use a call debit spread.

This strategy allows you to participate in the move while significantly reducing your costs and risks.

So, let's say GOOGL is trading around $138:

• Buy the $138 call
• Sell the $142 call in the same expiration
• Your risk is reduced, breakeven is lower, and you still benefit from a move higher

This is the same IV ramp setup—but with a smaller price tag and more controlled downside. Just remember to buy and sell both options at the same time, as one order ticket. 

Editorial content from our expert contributors is intended to be information for the general public and not individualized investment advice. Editors/contributors are presenting their individual opinions and strategies, which are neither expressly nor impliedly approved or endorsed by Benzinga.

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