Any good trading strategy during the Quarterly Result season? Except Straddle/Strangle

Remember a good quarterly number from market’s perspective is one which beats the market expectation and not the one which the company perceives as good. For example if the company’s revenue grows by 20%, the company may think this is good result…but if the market expectation is 22% then the stock will go down.

So keeping the above in perspective you can do couple of things -

  1. Directional Bets - If you have a view on what kind of results to expect then take a plain vanilla long / short bet on the company’s stock price. You can do this by futures or by options

  2. Market Neutral - If you dont know what kind of results to expect but you are certain the stock price will move either which way then obviously setting up straddle and strangles will help.

  3. Peer Trades - If company A delivers exception results then the closest competitor to company A is also likely to do well. Hence you can do a direction trade on the competitor. For example if Tata Motor has done well and while announcing results they make a statement saying “overall market conditions have improved” then it makes sense to pick up Maruti, which a hope Maruti is a beneficiary of improved market condition.

I read somewhere that observing the price movement 1-2 days before the result announcement date can sometimes give an indication of the direction in which the stock will move on result day. Interestingly TCS fell 2.5% today, dragging other IT stocks, despite a strong day for the bulls. So would it be right to expect it to fall tomorrow (result day) as well?

US and European markets are down today and SGX Nifty too is down around 1% at the time of writing this. Thoughts on TCS for Thursday?