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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.

Upcoming Notable Earnings

Symbol/Company Earnings Date Predicted Move Since Last Earnings Est EPS
STZ - Constellation Brands Inc Today -
Before Open
5% 33.3% 2.03
BBBY - Bed Bath & Beyond Inc Wed 8 Jul -
After Close (7 Days)
7% 138.7% -1.40
WBA - Walgreens Boots Alliance Inc Thu 9 Jul -
Before Open (8 Days)
4% -1.5% 1.10
DAL - Delta Air Lines Inc Thu 9 Jul -
Before Open (8 Days)
3% 21.4% -4.24
PEP - PepsiCo Inc Mon 13 Jul -
Before Open (12 Days)
1% -1.6% 1.25
WFC - Wells Fargo & Co Tue 14 Jul -
Before Open (13 Days)
2% -18.5% 0.14
C - Citigroup Inc Tue 14 Jul -
Before Open (13 Days)
2% 12.5% 0.52
JPM - JPMorgan Chase & Co Tue 14 Jul -
Before Open (13 Days)
1% -4.2% 1.40
EBAY - eBay Inc Wed 15 Jul -
Before Open (14 Days)
5% 34.4% 0.90

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 (%)
AYI - Acuity Brands Inc Tue 30 Jun Before Open (1 days ago) 57.02% 7.18% 0%
CAG - Conagra Brands Inc Tue 30 Jun Before Open (1 days ago) 10.29% 4.36% 4.4%
MU - Micron Technology Inc Mon 29 Jun After Close (2 days ago) 5.63% 4.82% 4.8%
WUBA - 58.com Inc Fri 26 Jun Before Open (5 days ago) 0% -0.31% -0.3%
RAD - Rite Aid Corp Thu 25 Jun Before Open (6 days ago) 92.59% 26.57% 32.6%
NKE - Nike Inc Thu 25 Jun After Close (6 days ago) -2650% -7.62% -3.3%
BB - BlackBerry Limited Wed 24 Jun After Close (7 days ago) 100% -1.42% -0.6%
KBH - KB Home Wed 24 Jun After Close (7 days ago) -3.51% -11.85% -8%
INFO - IHS Markit Ltd Tue 23 Jun Before Open (8 days ago) 0% -0.71% 3%

Earnings News

Rocky road ahead at Macy's, sees potential 'regional flare-ups' of coronavirus hurting sales

The road to recovery at Macy's is likely going to be a rocky one because of the coronavirus pandemic. The retailer warned Wednesday that sales are falling again in states such as Texas where Covid-19 cases are on the rise.

CNBC  Wed, 01 Jul 2020 13:41 GMT

Michael Kors owner Capri estimates 70% plunge in first-quarter revenue

Michael Kors owner Capri Holdings on Wednesday estimated a 70% slump in first-quarter sales after the coronavirus hammered luxury sales.

CNBC  Wed, 01 Jul 2020 13:15 GMT

Macy's reports first-quarter loss but does not expect 'another full shutdown'

Macy's on Wednesday reported a first-quarter loss, in line with the retailer's previously announced estimates.

CNBC  Wed, 01 Jul 2020 11:17 GMT

FedEx shares jump over 9% as quarterly results top expectations

Shares of FedEx jumped 9.4% in extended trading on Tuesday after a surge in pandemic-fueled home deliveries helped the U.S. package carrier post better-than-expected quarterly profit and revenue.

CNBC  Wed, 01 Jul 2020 10:25 GMT

U.S. market is 'smoking dope on earnings' and investors are likely to be disappointed, economist says

Investors should stay bearish on U.S. stocks until the full extent of the economic damage caused by the coronavirus pandemic is known, according to TS Lombard.

CNBC  Tue, 30 Jun 2020 13:30 GMT

Micron to shift some chip supply to data centers as cloud powers earnings beat

Micron Technology on Monday forecast current-quarter revenue above Wall Street estimates as home-bound employees and students spur demand for its chips that power notebooks and data centers, sending its shares up 6% in after-market trading.

CNBC  Tue, 30 Jun 2020 10:32 GMT

Burger King's U.S. same-store sales are flat as fast-food customers return to restaurants

Burger King's U.S. same-store sales are trending flat as customers return to its locations for Whoppers and french fries.

CNBC  Mon, 29 Jun 2020 12:00 GMT

With the second quarter almost over, what companies earned is anyone's guess

The second quarter is nearly over, and analysts still are clueless about what earnings companies will be reporting.

CNBC  Fri, 26 Jun 2020 11:05 GMT

Nike reports unexpected loss as sales tumble 38%, shares fall

Even Nike, often lauded as one of the strongest global brands in the retail industry, is taking a hit from the coronavirus pandemic.

CNBC  Thu, 25 Jun 2020 20:25 GMT

Olive Garden parent swings to a loss as sales plunge 43%

Darden Restaurants reported that same-store sales were nearly cut in half during the fiscal fourth quarter.

CNBC  Thu, 25 Jun 2020 11:42 GMT

Oracle slides on revenue decline

Sales declines returned as Oracle kept doing business through the pandemic.

CNBC  Tue, 16 Jun 2020 20:10 GMT

Lululemon sales fall 17% as retailer takes hit from stores being closed, shares drop

Lululemon reported a first-quarter sales decline of 17%, as its strong digital business wasn't enough to offset the losses from its stores being temporarily shut due to the coronavirus pandemic.

CNBC  Thu, 11 Jun 2020 20:12 GMT

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