How to Play the “Earnings Season” in U.S. Stocks? A Retail Investor’s Guide to Avoiding Pitfalls

Every quarter, U.S. stocks go through earnings season, and the stock price swings are huge. Before NVDA’s last earnings report, I made some moves—let me review what I did.

A few days before the earnings are released, the market will have expectations. If expectations are high, the stock price will be pushed up in advance. NVDA rose 5% in the week before its last earnings report. I chose to sell half of my position three days before the earnings (even though I only had 0.02 shares), locking in the profits.

After the earnings were released, it indeed beat expectations, but the stock price only rose 1% and then fell back to flat. Because the good news had already been priced in. I took the opportunity to buy back the half I had sold, at a cost that was 0.5% lower than my sell price.

This is called “earnings arbitrage”: reduce your position when expectations are running high, then buy back after the earnings are out. Of course, this requires you to have a rough idea of how the earnings will come out. If you get it wrong—for example, if the earnings miss expectations and the stock crashes—you’ve dodged a disaster. If it beats expectations and the market reacts strongly, you might end up missing the move.

There’s no foolproof strategy. These days, I’m more inclined to “not trade before earnings,” because short-term trading is too exhausting. But if you have the energy, you can try it with a small position.

You can check the earnings dates on Gate. On the stock details page, there is an “earnings calendar.” It’s recommended that you set reminders so you at least know which day will bring big news. Then decide your strategy in advance: reduce your position to hedge, place a bet, or do nothing.

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