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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
MU - Micron Technology Inc Today -
After Close
7% -17.3% 0.75
FDX - FedEx Corp Today -
After Close
3% -11.3% 4.81
BB - BlackBerry Limited Tomorrow -
Before Open
9% -4.6% -0.03
RAD - Rite Aid Corp Tomorrow -
After Close
7% 0% 0.02
WBA - Walgreens Boots Alliance Inc Thu 27 Jun -
Before Open (2 Days)
4% 0% 1.43
ACN - Accenture PLC Thu 27 Jun -
Before Open (2 Days)
3% 11.8% 1.88
NKE - Nike Inc Thu 27 Jun -
After Close (2 Days)
5% -4% 0.66
STZ - Constellation Brands Inc Fri 28 Jun -
Before Open (3 Days)
5% 5.2% 2.07
PEP - PepsiCo Inc Tue 9 Jul -
Before Open (14 Days)
1% 9.6% 1.50

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 (%)
KMX - Carmax Inc Fri 21 Jun Before Open (4 days ago) 6.71% 3.18% -0.4%
KR - Kroger Co Thu 20 Jun Before Open (5 days ago) 1.41% -2.16% -6.6%
CCL - Carnival Corporation Thu 20 Jun Before Open (5 days ago) 8.2% -7.65% -12.9%
RHT - Red Hat Inc Thu 20 Jun After Close (5 days ago) 27.42% -0.37% -0.4%
ORCL - Oracle Corp Wed 19 Jun After Close (6 days ago) 9.18% 8.18% 7.7%
JBL - Jabil Inc Tue 18 Jun After Close (7 days ago) -28.21% 10.25% 11.2%
ADBE - Adobe Systems Inc Tue 18 Jun After Close (7 days ago) 4.26% 5.21% 8.3%
SFUN - Fang Holdings Ltd Mon 17 Jun Before Open (8 days ago) 0% -2.41% -12%
FNSR - Finisar Corp Thu 13 Jun After Close (12 days ago) 26.67% -2.29% 1.3%

Earnings News

Lennar profit beats as lower mortgage rates boost home sales

Lennar reported a higher-than-expected quarterly profit on Tuesday, as the No. 2 U.S. homebuilder's sales got a boost from lower interest rates for mortgages.

CNBC  Tue, 25 Jun 2019 11:15 GMT

Company earnings look like they will keep sliding through the third quarter

While earnings usually come in substantially ahead of expectations, the direction in the outlook doesn't speak well for what lies ahead

CNBC  Mon, 24 Jun 2019 18:06 GMT

Carnival cuts 2019 profit on Cuba travel ban, higher expenses

Carnival cut its profit forecast for the year on Thursday due to the Trump administration's sudden ban on cruises to Cuba and higher expenses related itinerary changes for one of its ships.

CNBC  Thu, 20 Jun 2019 13:16 GMT

Shares of Olive Garden parent Darden skid after revenue miss

Declining traffic to Olive Garden, Darden's top restaurant chain, resulted in weaker-than-expected revenue for its fiscal fourth quarter.

CNBC  Thu, 20 Jun 2019 12:45 GMT

US Steel to idle three blast furnaces, hurt by lower prices and soft demand

U.S. Steel said it would idle two blast furnaces in the U.S. and a third in Europe, amid lower steel prices and softening demand.

CNBC  Wed, 19 Jun 2019 10:53 GMT

Adobe rises despite soft guidance

Adobe expects fiscal third-quarter earnings and revenue that are below what analysts were looking for.

CNBC  Tue, 18 Jun 2019 20:16 GMT

Adobe looks cheap to trade ahead of earnings

The "Fast Money" traders share their first moves for the market open.

CNBC  Tue, 18 Jun 2019 14:37 GMT

Chip stocks are tanking after 'depressing' Broadcom earnings in a bad sign for market

Broadcom led a plunge in chip stocks Friday after the chipmaker missed revenue expectations and lowered guidance.

CNBC  Fri, 14 Jun 2019 11:04 GMT

Broadcom falls after slashing revenue guidance

Broadcom shares moved lower on Thursday after the company lowered revenue guidance for the year.

CNBC  Thu, 13 Jun 2019 20:27 GMT

RH soars 23% on earnings beat as retailer's luxury strategy begins to pay off

RH tops earnings and revenue estimates, attributing its performance to its strategy of transforming into a luxury lifestyle brand.

CNBC  Thu, 13 Jun 2019 12:34 GMT

Lululemon stock jumps after strong earnings, raises full-year guidance

Lululemon shares, as of Wednesday's market close, have surged more than 40% this year.

CNBC  Wed, 12 Jun 2019 20:22 GMT

Norwegian Cruise Line says Cuba travel ban to hit 2019 earnings

Norwegian Cruise Line said on Friday the Trump administration's sudden ban on cruises to Cuba would hit its 2019 profit.

CNBC  Fri, 07 Jun 2019 13:00 GMT

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