Earnings Season Kickoff: How Retail Traders Should Position Before the Banks Report Q3 Numbers

Every October, right on schedule, the big banks open earnings season and the rest of the market takes its cue. JPMorgan, Bank of America, Wells Fargo, and the other money-center names report first — usually in the second week of the month — and what they say about loan demand, credit quality, and trading revenue sets the tone for six weeks of Q3 reports behind them. If you trade stocks or options around earnings, this is the week to get your process in order before the calendar does it for you.

I've sat through more earnings seasons than I care to count, on the floor and off it, and the pattern never really changes: traders who have a plan going in treat earnings season as a series of individual, sized bets. Traders who don't treat it as one long gamble on "the market" and get surprised by how much a single sector can move the tape. Here's how to think about the weeks ahead without turning your account into a referendum on every headline.

Why Bank Earnings Set the Tone

The banks report first for a structural reason — their quarter closes cleanly and their numbers are relatively simple to tabulate — but traders treat them as a tone-setter for a different reason. Bank earnings are a direct read on the economy retail investors can't get anywhere else: net interest margin tells you what's happening to borrowing costs, loan-loss provisions tell you what banks think is coming for consumers and small business, and trading desk revenue tells you how active the pros have been. When the banks beat and guide calmly, risk appetite usually broadens into the following weeks. When they miss or get cautious on credit, expect volatility to show up in sectors that have nothing to do with banking.

None of that means you should trade bank stocks you don't understand just because they report first. It means you should watch the reaction, not just the headline number, before you decide how much conviction to bring to your own positions later in the season.

Implied Volatility Is Already Pricing This In

Options on companies reporting this cycle are carrying elevated implied volatility right now, and that IV will keep climbing into each individual print before collapsing the morning after — the classic IV crush. This matters for two reasons. First, if you're buying calls or puts into an earnings date hoping for a big move, you need the move to be bigger than what's already priced in, not just directionally correct. Second, if you're a premium seller, this is exactly the environment defined-risk strategies exist for: iron condors and credit spreads let you collect inflated premium while capping what a surprise can cost you.

Check IV rank before you do either. A stock sitting at the 80th percentile of its own one-year IV range is a very different risk proposition than one sitting at the 30th, even if the option prices look similar in dollar terms.

Sizing Through a Season, Not a Single Trade

The mistake I see most often isn't a bad individual earnings trade — it's a good trader who runs five or six earnings positions in the same two-week window, each sized like it's the only trade on the books. Correlation doesn't disappear just because the tickers are different. A broad risk-off reaction to one sector's miss can move your "unrelated" positions against you all at once.

Treat earnings season like a budget. Decide up front what percentage of your account you're willing to have at risk across all earnings-related trades combined, not per trade, and let that number — not your enthusiasm after a winning week — decide how many new positions you open.

What to Actually Do This Week

Before the first bank reports, walk through your calendar and flag every position and watchlist name with an earnings date in the next three weeks. For each one, write down — before the print, not after — what IV is doing, what your max loss is if you're wrong, and whether you're trading the stock or trading the volatility. If you can't answer all three without checking a screen, you're not ready to size the trade yet.

This is also the week to tighten up stops on existing swing positions that have nothing to do with earnings. Broad market volatility tends to rise during reporting season even for stocks that aren't reporting, simply because index-level moves get bigger. A stop that made sense in a quiet September can be too tight — or too loose — for an October tape.

Discipline Beats Prediction

Nobody trades earnings season well by guessing the headline number before it prints. The traders who come out ahead are the ones who sized correctly, respected what IV was already pricing in, and had an exit plan before the open — win or lose. That's not a market call. That's a process, and it's the same process whether the banks beat big or miss across the board.

If you want to build that process alongside traders and coaches who've done this across dozens of earnings seasons, not just read about it, the AJ Monte community is the place to start. Take the 15-day free trial of AJ Monte's trading program and see how a coach with 40+ years of floor experience actually sizes and manages risk through a season like this one.