When uncertain use cash and/or options

At times it is better to hold cash instead of taking a position; especially if there is going to be a major announcement with uncertain outcome. You may not make any money by holding cash, but you will also not lose any. You can then take advantage of whatever situation arises after the announcement.

If you still want to take a position before the announcement then take a small position, or use options to control the amount of risk you want to take. You can buy put options if you believe the announcement will be negative (long puts increase in value as the underlying price goes down); or you can buy call options if you think the announcement will be positive (long call options increase in value as the underlying price goes up). The benefit of using these option strategies is that you limit your risk to the premium paid for the options.

Announcements for which you should hold cash or use options include;

1. Major economic data release (Check Bloomberg Economic calendar for the events with red asterisks)
2. Geopolitical events
3. Company earnings release or other major corporate announcements
4. FDA announcements