Money Rehab with Nicole Lapin - Surviving Earnings Season Without Gambling Your Money Away

Episode Date: October 14, 2026

The Money School: The Complete Financial Education You Were Never Given Nicole's most comprehensive book yet, the financial curriculum that should have been taught in school but never was. From your first paycheck to investing, buying a home, building wealth, and planning your legacy, The Money School is the full course in plain English. Go check it out: https://nicolelapin.com/money-school-book Four times a year, the biggest companies in America have to show you their report card, and it gets dramatic. If you’ve ever watched a stock you own swing 15% in a single day and had no idea why, this one is for you. ----------------------- MORE FROM NICOLE LAPIN: 🎥 Youtube: / @moneyrehabshow 📸 Instagram: / moneyrehab 📽️ TikTok: / nicolelapin 🌐 Nicole's website: https://nicolelapin.com OTHER THINGS WE DO: 💰 Private Wealth Collective: https://privatewealthcollective.com 🏦 The Money School: https://themoneyschool.com Learn more about your ad choices. Visit megaphone.fm/adchoices

So four times a year, the biggest companies in America basically have to show all of us their report card. And honestly, it can get pretty dramatic. This is earnings season. And if you have ever watched a stock, you own swing 15% in a single day and had absolutely no idea why. Well, all this will be revealed today. The reason I want to talk to you about this is because earning season is the only time we can predict volatility. Most volatility is unpredictable by nature, right? but earnings season will bring volatility.

And so once I started understanding the factors driving that volatility, I could both protect myself and take advantage of it. So public companies legally have to report their financial results every single quarter. These results get filed in a proper document, but what most people actually tune in for is the earnings call. It's a live, scripted, but also not so scripted, spontaneous event, where the CEO, the CFO, and sometimes other executives, walk through the numbers, share their outlook, and then open the floor to questions from

Wall Street analysts. It's like a quarterly performance review, but in front of thousands of investors with the stock price reacting in real time. So it can get kind of juicy. These calls happen roughly in January, April, July, and October when companies report results from the previous quarter. So right now we are squarely in Q3 earning season. Some of the biggest names in the market, the MAG 7, the big banks, the major retailers are all reporting within a few weeks of each other. It's a financial news fire hose. The headline numbers are revenue and earnings per share. Earnings per share or EPS is the profit divided by the number of shares outstanding. It's essentially how much money the company made per share. These are the numbers that get compared to Wall Street's

estimate. And this is important to get these estimates, a team of analysts at major banks, months trying to predict what a company is going to report. They build models. They talk to suppliers. They run surveys. They even track satellite images of parking lots. I am not kidding. I kind of wish I was, but that is real life. Those predictions get aggregated into a consensus estimate. That number is everything. As far as the stock market is concerned, actual profit matters less than whether the company beat or missed estimates. Now, beyond revenue and EPS, guidance might be the single most important thing on an earnings call. Guidance is the management's forecast for a company's future performance. These might be outlooks on expected revenue or earnings. A company can beat estimates

for the current quarter and their stock can still get crushed if they lower their guidance for the next quarter. Seriously, the stock market is so forward-looking as a machine. It doesn't really care as much about what just happens as it does about what's coming ahead. When I explain all this to my clients at my firm Private Wealth Collective, I give two examples that happen to the same company roughly one year apart. So back in February of 2022, Meta reported its Q4-2020 earnings. At that time, the company was riding high on its Facebook, Instagram, WhatsApp Empire. Revenue was basically in line, but the company disclosed that daily active users on Facebook had declined for the first time ever by about half a million users. Plus, their guidance was weak. The stock dropped 20,

6% in a single day. That wiped out roughly $232 billion in market cap in 24 hours. That is the largest one-day loss in market cap of any company in the U.S. stock market history. $232 billion because of one bad metric in one bad earnings call. This is why I ask CEOs that come on the show if leading public companies suck. And sometimes the answer is yes. I had a funny conversation about this with the co-founder of Lyft John Zimmer a few years ago, and I'll link that conversation for you in the show notes. But back to the second story. In April of 2023, META reported its Q1 results after a brutal 2022. The company posted better than expected revenue and said it was cutting costs aggressively, calling 2023 the year of efficiency. The stock had already climbed from its lows, but it had

jumped another 14% after that call. Investors had been scared. The guidance reassured them. That is all it took. Now, there is a wild category that I'll include here as an honorable mention. That's companies that miss expectations badly, but then somehow go up anyway. This happens when the miss was already priced in, so to speak. That basically means that investors had already sold off the stock in anticipation of bad news. So when the numbers came in and weren't that bad, the stock actually pops. This is what's called a relief rally, and it can actually make you crazy if you watch it too closely, so try not to, because the company literally reported bad numbers and then the stock goes up. This is why earnings season can feel absolutely insane to regular investors trying to make sense

of it. So what we should actually try to do around earning season? My hot take? Absolutely nothing. The thing everyone wants to do is buy a stock right before it reports, hope it beats expectations, watch it jump, sell it, collect the profit. It very rarely goes like that. Here's the problem. By the time you've deduced that a company is going to have a good quarter, every professional on Wall Street has already had that idea and traded on it. The current stock price already reflects the consensus view. For you to make money on an earnings beat, the company has to beat by more than the market expected, a surprise above the already high expectation.

And you, as an individual investor, almost certainly do not have better information than the Goldman Sachs analyst who was covering this company. for 10 years already, talks to its suppliers every quarter and literally models satellite data of retail parking lots. That is why the house always wins. You know, there's also a volatility problem. A lot of traders try to use options around earnings, buying calls if they think the stock will go up, buying puts if they think it will go down. Remember, call up, put down. If this sounds like absolute gibberish to you, I've linked another episode in the show notes where I go into blocking and tackling of options trading. Basically, traders try to hedge their bet.

But here's what ends up happening. Like I said earlier, everyone knows that earnings season is volatile. So in the weeks before an earnings report, the implied volatility on those options spikes dramatically as traders bid them up. That spike inflates the price of the options. Then the moment the earnings come out, even if the report is great, that implied volatility basically collapses. This is what's called a volatility crush and it can wipe out your options position even

if you got the direction right. You picked the right outcome and you still lost money. If I'm being real here, this part of it is just gambling. So what is a regular investor supposed to do? Like I said, probably nothing. Stop trying to predict earnings. Seriously, the research here is not mysterious. Consistently timing short-term trades around earnings is not a reliable wealth-building strategy. The people who do it professionally, like hedge funds with teams of analysts, proprietary data and risk management systems don't win every time either. But I'll give you a tip here. Here is the real tool that lets you take a position without going all in and hoping for the best. Limit orders, my favorite. A limit order is an instruction to your brokerage to buy or sell a stock only at a specific price or

better. So I'm just making this up here. You can place an order that tells your brokerage that you want to buy in Vivida if the stock goes below 100 bucks. So let's say a company you've been watching about to report earnings and you think the stock is a buy, but only if it drops to a level where the valuation makes sense to you. You set a buy limit order at that price. If the stock tanks post earnings, which happens all the time, and it hits your target, your order fills automatically. You got in at the price, the exact price you wanted. If it never drops that far, you just don't buy it, no harm, no foul. The same logic works on the sell side. If you already own a stock and you're worried about a bad earnings report, let's say, you can set a sell limit order at a price

that protects you from a full-on crash. This is a more targeted version of a stop-lost. You're not just saying sell it if it drops at all. You're saying sell it if it reaches this very specific level that tells me that the story has fundamentally changed. This is a patient investor move. And this is what I do because I like the long game. You're not trying to predict the future. You're setting up the conditions under which you'd want to act and letting the market come to you. That's a fundamentally different mentality than trying to outsmart Wall Street on a Tuesday night. Warren Buffett has said in various ways that he loves it when great companies have bad earnings reports because it gives him the opportunity to buy more at a lower price.

That is the long game. Limit orders are the mechanism that makes that mindset actionable. For today's tip you can take straight to the bank. set a watch list of high quality companies that you'd want to own but only at the right price, and then load up on buy limit orders before their earnings report. If the report disappoints and the stock price goes down, you'd buy a great business at a discounted price automatically while everyone else is panicking. You turn someone else's bad day into your good injury point. You don't have to be awake at 4 a.m. when the pre-market trading is going on. Don't have to have to be awake. You don't have to make a split-second emotional decision based on the news. You just have to set that limit

order and let the volatility work for you.