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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
CGC - Canopy Growth Corporation Today -
Before Open
10% 0% -0.26
WB - Weibo Corporation Today -
Before Open
7% 42.3% 0.68
XNET - Xunlei Ltd Today -
Before Open
7% 182%
VIAB - Viacom Inc. Today -
Before Open
4% -25.7% 0.76
WMT - Walmart Inc Today -
Before Open
3% 13.9% 1.09
NVDA - NVIDIA Corp Today -
After Close
7% 40.2% 1.24
AMAT - Applied Materials Inc Today -
After Close
3% 21.1% 0.76
WPM - Silver Wheaton Corp Today -
After Close
3% -3.5% 0.16
JCP - J C Penney Company Inc Tomorrow -
Before Open
9% 91.2% -0.55

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 (%)
TRVG - Trivago N.V. ADS Tue 5 Nov Before Open (9 days ago) -100% -18.29% -23.3%
PBI - Pitney Bowes Inc Tue 5 Nov Before Open (9 days ago) 14.29% 7.1% -0.2%
MNK - Mallinckrodt public limited company Tue 5 Nov Before Open (9 days ago) 4.55% -13.51% -24.4%
ARNC - Arconic Inc Tue 5 Nov Before Open (9 days ago) 9.43% 2.54% 2.5%
CHK - Chesapeake Energy Corporation Tue 5 Nov Before Open (9 days ago) -10% -17.95% -55.1%
ICPT - Intercept Pharmaceuticals, Inc. Tue 5 Nov Before Open (9 days ago) -10.21% -2% 10.4%
WLK - Westlake Chemical Corporation Tue 5 Nov Before Open (9 days ago) 19.61% 9.26% 4.1%
ATHM - Autohome Inc Tue 5 Nov Before Open (9 days ago) 1.23% -13.49% -16.2%
MYL - Mylan N.V. Tue 5 Nov Before Open (9 days ago) 2.63% -9.88% -12.5%

Earnings News

Tyson Foods earnings miss forecasts as slaughterhouse fire hurts beef sales

The No.1 meat processor in the U.S. was hit by weakness in its beef business, its biggest segment, due to a drop in cattle processing capacity.

CNBC  Tue, 12 Nov 2019 12:52 GMT

Homebuilder DR Horton sees 2020 home sales above estimates, shares rise

D.R. Horton beat Wall Street estimates for quarterly profit and forecast 2020 home sales above estimates on Tuesday, as the No. 1 U.S. homebuilder benefits from strong demand on the back of cheaper mortgage rates.

CNBC  Tue, 12 Nov 2019 12:01 GMT

Tencent Music's quarterly revenue beats on subscriber growth

China's Tencent Music Entertainment reported better-than-expected third-quarter revenue on Monday, as the streaming company added more paying users.

CNBC  Tue, 12 Nov 2019 11:35 GMT

Dropbox stock pops, then fizzles on earnings beat

Dropbox revenue growth accelerated sequentially in the third quarter as the company seeks to improve the collaborative experience.

CNBC  Thu, 07 Nov 2019 21:15 GMT

Disney stock rises after beating on top and bottom lines

Disney's fiscal fourth-quarter earnings come just days before Disney+ is set to launch.

CNBC  Thu, 07 Nov 2019 20:31 GMT

Expedia, TripAdvisor fall more than 20% after blaming poor earnings on decrease in Google search results

Expedia and TripAdvisor stocks tanked following poor third-quarter earnings after the bell Wednesday.

CNBC  Thu, 07 Nov 2019 15:41 GMT

GoDaddy shares surge on its biggest-ever buyback plan

GoDaddy reported a 12% rise in quarterly revenue as the web hosting company earned more per user. Shares surged in premarket trading after announcing its biggest share buyback ever.

CNBC  Thu, 07 Nov 2019 12:54 GMT

Qualcomm stock spikes after licensing business propels earnings and revenue past estimates

Qualcomm said in its release the strong profit was primarily due to its licensing business, which will continue to benefit in the move to 5G.

CNBC  Wed, 06 Nov 2019 21:53 GMT

Roku shares tank despite revenue beat for the third quarter

The company reported 32.3 million active accounts, up from 30.5 million during the previous quarter.

CNBC  Wed, 06 Nov 2019 20:35 GMT

Papa John's stock jumps after executive reshuffle announcement and revenue beat

CEO Rob Lynch, who has been with the company for two months, is changing the pizza chain's management structure.

CNBC  Wed, 06 Nov 2019 13:18 GMT

Altice USA misses estimates, cuts full-year sales forecast; shares slide

Altice USA missed expectations for third-quarter results on Tuesday due to weakness at its pay-TV division and the cable TV provider cut its full-year sales forecast, sending its shares down 10%.

CNBC  Wed, 06 Nov 2019 13:12 GMT

Humana raises 2019 profit forecast as Medicare Advantage unit flourishes

Humana reported third-quarter profit that beat Street estimates on higher sales of its government-backed Medicare Advantage health plans, and raised its full-year earnings forecast.

CNBC  Wed, 06 Nov 2019 12:12 GMT

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