The trade: I talked in a prior article about CF Industries Holdings (CF), an agribusiness stock I’m bullish on. Much as I love it, I will sell two-thirds of my position before the company reports earnings Nov. 1. This is my standard practice: If it’s a straight swing trade, or if I have less than a 10 percent gain, I sell the whole position before earnings. If it’s a long-term trade and I’m up 10 percent or more, I’ll sell between half and two-thirds.

See why Petra Hess is bullish on CF Industries and agribusiness

Why I do this: For me, trading is about probabilities. Earnings are a catalyst event and I have had too many of those work against me, so probabilities tell me to step aside, rather than being what I call a “stuck holder.”

A good example of this was Applied Optoelectronics Inc. (AAOI), which I once held as it gapped down 20 percent in one day. All of a sudden, I was 20 percent underwater. The stock never recovered; at the next earnings report, it gapped down another 17 percent.

On something like CF, I’ll take off two-thirds of that position, and bank a gain of roughly 20 percent. If it goes up or stays the same, I’ll look to add it back. If it gaps down slightly, there’s a chance I’ll add it back. Most of the time, however, if a stock gaps down, I walk away with a profit.

The bottom line: Trading, for me, is about keeping the money I already have and building on it. I see a lot of investors struggling to make the same money over and over again; that’s a mistake I don’t want to make.

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Petra Hess runs PetraPicks.com. She is a technical swing trader and long-term investor in domestic and Canadian stocks and ETFs. At the time this article was published on RagingBull.com, she held 330 shares of CF (purchased Sept. 7 at $31.32) and was planning to sell 220 of those shares before the company’s Nov. 1 earnings announcement. She had no shares, options or open orders in AAOI.

Author: Jason Bond

Jason taught himself to trade while working as a full-time gym teacher; his trading profits grew eventually allowed him to free himself of over $250,000 in student loans!

Now a multimillionaire and a highly skilled trader and trading coach, Over 30,000 people credit Jason with teaching them how to trade and find profitable trades. Jason specializes in both swing trades and in selling options using spread trades, which balance the risk of selling options. Jason is Co-Founder of RagingBull.com and the RagingBull.com Foundation which donates trading profits to charity. So far the foundation donated over $600,000 to charity.

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