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Ride-the-Wave Strategy – Best for Stock Traders

Ride-the-Wave targets multi-day price momentum following a company’s earnings announcement (EA). With this strategy:

  1. Buy a stock one day post-EA if a stock reacts positively post-earnings:
    1. Near the close of trading the EA-day for a pre-market-EA
    2. Near the close of the following day for a post-market-EA
  2. Sell-to-close after 7-10 days, or possibly earlier if a desired price target is reached

Similarly,

  1. short a stock one day post-EA if a stock reacts negatively post-earnings:
    1. near the close of trading the EA-day for a premarket-EA
    2. near the close of the following day for a post-market-EA
  2. then buy-to-close after 7-10 days, or possibly earlier if a desired price target is reached

Important: Ride-the-Wave is predicated on significant price momentum triggered by an EA. The 7-10 day scenario is the maximum trade hold-time. If you see post EA-momentum is halted or reversed by a significant opposite move, re-evaluate your presence in the trade.

This popular StockEarnings screen below will give you a list of stocks that historically exhibit significant price momentum following an EA for the next seven days:

  1. Stocks exhibiting positive post-EA price moves are buy-candidates
  2. Stocks exhibiting negative post-EA price moves are sell/short-candidates

The screen includes those stocks whose Earnings just came out in last two days.

Screen criteria:

  1. Earnings Date Start Date : Current Date + -1 Day
  2. Earnings Date End Date : Current Date + -2 Days
  3. Predicted Move (Next Day) Max : 7%
  4. Predicted Move (On 7th Day) Min : 7%

Strategy Guideline:

  1. Buy the stock if stock has reacted positively. Short the stock if stock has reacted negatively (see above).
  2. Close the position in 7-10 days, or possibly earlier based on price move.

Volatility Crush Strategy - Best for Options Traders

The Volatility Crush strategy is used with stocks that typically experience relatively low-to-moderate price moves (≤4%) following their Earnings Announcements (EA). The basic trade idea is to sell put or call options right before the EA, collecting a credit when options premium is very high due to elevated implied volatility (IV). You then close the position right after the EA by buying the option back much cheaper due to the significant drop in IV that occurs after the mystery of the EA disappears. In assessing this trade, you need to do your homework to ensure you collect sufficient premium to make the trade worthwhile.

This trade is practical due to the low-to-moderate price-move after the EA, which generally won’t significantly affect the options price, unlike an “action” stock, which experience great price moves post-EA. With these symbols, if you’re on the right side of the price move, that’s a great thing. But if you’re on the wrong side of the move, not so great. Consequently, by minimizing the effect of the post-EA price move, you have a much better chance to profit from the reduction in IV without it being ruined by a violent price move.

For this trade, open the position either (1) the night before the EA when the company announces earnings or (2) during the EA day when it announces post-market, generally capturing IV at or close to its peak.

For this trade, open the position either (1) the night before the EA when the company announces earnings or (2) during the EA day when it announces post-market, generally capturing IV at or close to its peak.

This popular stockearnings screen will give you a list of stocks which do not react more than 4% fpost-EA. It includes only those stocks whose earnings are releasing next day.

Screen criteria:

  1. Earnings Date Start Date : Current Date + 1
  2. Earnings Date End Date : Current Date + 1
  3. Predicted Move (Next Day) Max : 4%
  4. Options Type: Weekly

Strategy Guideline:

  1. Options Strategy: Sell Call and Put
  2. Options Strike Price: Current Stock Price – (% Predicated Move x 2)
  3. Expiration Date: It should generally be the closest expiry immediately after the EA.
  4. Buy Insurance: Buying back Call and Put at Strike price which 10% lower than Sell Strike Price is optional but recommended.

Watch Video for More Detail

Volatility Rush Strategy - Best for Options Traders

The Volatility Rush takes advantage of increasing options premiums into earnings announcements (EA) caused by an anticipated rise in Implied Volatility (IV). With this strategy, Buy a Call and Put at-the-money (a long straddle) 2-3 weeks before the EA when IV is lower. Sell the position either (1) the night before the EA when the company announces earnings pre-market, or (2) during the EA day when it announces post-market, generally capturing IV at or close to its peak.

This popular screen will give you a list of stocks whose Options premiums tend to rise into Earnings. It includes only those stocks whose Earnings are at least two weeks away from today.

Screen criteria:

  1. Earnings Date Start Date : Current Date + 15 Days
  2. Earnings Date End Date : Current Date + 30 Days
  3. Predicted Move (Next Day) Min : 5%
  4. Options Type: Weekly or Monthly if that lines up with the two to three-week lead-time for entering the trade

Strategy Guideline:

  1. Buy a Straddle at or close to the money two to three weeks pre-EA.
  2. Sell the position either the night before the EA when the company announces earnings pre-market, or during the EA day when it announces post-market.
  3. Expiration date should generally be the closest expiry immediately after the EA.
  4. Straddle price should not be more 60% of predicted move.

Since Last Earnings

Change in share price since last Earnings release.

Why is it Important?

When share has gained more than 10% since it's last Earning release, it tends to over react to minor bad news and give up some gains if not all. So, it contains more downside volatility than upside When share has dropped more than 10% since it's last Earning release, it tends to over react to minor good news and recover some drops if not all. So, it contains more upside volatility than downside.

EPS Surprise (%)

Occurs when a company's reported quarterly or annual profits are above or below analysts' expectations. Here is the formula to derive % EPS Surprice:

Actual EPS - Estimated EPS
------------------------------------- x 100
Estimated EPS

Why is it Important?

Earnings surprises can have a huge impact on a company's stock price. Several studies suggest that positive earnings surprises not only lead to an immediate hike in a stock's price, but also to a gradual increase over time. Hence, it's not surprising that some companies are known for routinely beating earning projections. A negative earnings surprise will usually result in a decline in share price.

Next Day Price Change (%)

Next Regular trading session Closing price following Earnings result.

For After Market Close Earnings, It is a next trading day closing price. For Before Market Open Earnings, It is the same trading day closing price.

Why is it Important?

Next Day price change is a reaction of Earnings result.

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Upcoming Notable Earnings

Symbol/Company Earnings Date Predicted Move Since Last Earnings Est EPS
BAC - Bank of America Corp Today -
Before Open
2% -2.8% 0.70
ABT - Abbott Laboratories Today -
Before Open
2% 8.9% 0.80
BK - Bank of New York Mellon Corp Today -
Before Open
2% -19.3% 0.94
USB - U.S. Bancorp Today -
Before Open
1% 5.5% 1.07
PNC - PNC Financial Services Group Inc Today -
Before Open
1% 7.8% 2.83
NFLX - Netflix Inc Today -
After Close
12% 1.8% 0.56
URI - United Rentals Inc Today -
After Close
7% 9.4% 4.48
EBAY - eBay Inc Today -
After Close
5% 8.9% 0.49
IBM - International Business Machines Corp Today -
After Close
4% -1.1% 3.06

Stocks Screener for Earnings

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Earnings Date

Market Cap

Average Daily Volume

Predicted Move After Earnings

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Post Notable Earnings Analysis

Symbol/Company Earnings Date EPS Surprise (%) Next Day
Price Change (%)
Since Last
Earnings (%)
DPZ - Domino's Pizza Inc Tue 16 Jul Before Open (1 days ago) 9.5% -8.66% -8.7%
WFC - Wells Fargo & Co Tue 16 Jul Before Open (1 days ago) 12.07% -3.02% -3%
GS - Goldman Sachs Group Inc Tue 16 Jul Before Open (1 days ago) 22.83% 1.86% 1.9%
SCHW - Charles Schwab Corp Tue 16 Jul Before Open (1 days ago) 0% 3.3% 3.3%
JNJ - Johnson & Johnson Tue 16 Jul Before Open (1 days ago) 6.61% -1.64% -1.6%
JPM - JPMorgan Chase & Co Tue 16 Jul Before Open (1 days ago) 3.6% 1.07% 1.1%
SGEN - Seattle Genetics, Inc. Tue 16 Jul After Close (1 days ago) 38.46% 0% 0%
UAL - United Continental Holdings Inc Tue 16 Jul After Close (1 days ago) 3.44% 0% 0%
CSX - CSX Corp Tue 16 Jul After Close (1 days ago) -2.7% 0% 0%

Earnings News

Bank of America beats analysts' profit estimates on retail banking strength

But the bank warned that growth in net interest income may slow to a halt in the back half of the year.

CNBC  Wed, 17 Jul 2019 10:20 GMT

United Airlines posts higher profits and buys used Boeing 737s as Max grounding drags on

United Airlines' second-quarter profit tops estimates but questions about the 737 Max linger.

CNBC  Tue, 16 Jul 2019 20:16 GMT

Domino's stock sinks on disappointing sales, fanning doubts about expansion strategy

Despite an earnings beat, Domino's stock falls after the pizza chain reports disappointing sales.

CNBC  Tue, 16 Jul 2019 12:23 GMT

Wells Fargo falls despite profit beat as executives warn of higher expenses

The bank reported second-quarter profit that beat forecasts, but lower net interest income and caution around expenses weighed on the stock.

CNBC  Tue, 16 Jul 2019 10:44 GMT

Goldman Sachs earnings blow past Wall Street on strong investment banking, equity trading

Goldman's total revenue was down 2% from the second quarter of last year, while investment banking revenue fell 9% year over year.

CNBC  Tue, 16 Jul 2019 10:40 GMT

Johnson & Johnson falls despite 42% profit spike amid talc, opioid litigation fears

Johnson & Johnson shares fell 1% Tuesday despite the company posting a 42% profit spike amid concerns about lawsuits the company faces regarding its talc-based baby powder and its alleged role in the opioid crisis.

CNBC  Tue, 16 Jul 2019 10:40 GMT

JP Morgan posts an earnings beat, but forecast on interest income disappoints

The Federal Reserve's looming interest rate cuts appears to have impacted J.P. Morgan's forecast for 2019 net interest income.

CNBC  Tue, 16 Jul 2019 10:23 GMT

Half of the companies that have reported earnings so far say the strong dollar is hurting them

Of the S&P 500 companies that have reported so far, more than half of them cited a strong greenback as a headwind.

CNBC  Mon, 15 Jul 2019 13:52 GMT

Citigroup beats analysts' profit expectations on gains from Tradeweb IPO

Citigroup says gains from the Tradeweb IPO offset declines in trading and investment banking in the second quarter.

CNBC  Mon, 15 Jul 2019 11:59 GMT

With no trade deal near, company forecasts this earnings season are likely to be cloudy

Citigroup kicks off earnings season on Monday.

CNBC  Fri, 12 Jul 2019 11:16 GMT

Illumina plunges after slashing revenue expectations

Illumina said it now expects revenue to grow about 6% this fiscal year. That's far below its previous projection for about 13% to 14% revenue growth in fiscal 2019.

CNBC  Thu, 11 Jul 2019 21:43 GMT

Earnings will go negative this year, economic forecaster warns

Economic Cycle Research Institute co-founder Lakshman Achuthan warns a painful earnings trend will hit Wall Street.

CNBC  Thu, 11 Jul 2019 12:41 GMT

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