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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
CCL - Carnival Corporation Tue 7 Apr -
Before Open (2 Days)
3% 0% 0.28
DAL - Delta Air Lines Inc Wed 8 Apr -
Before Open (3 Days)
3% -59.9% 0.32
RAD - Rite Aid Corp Thu 9 Apr -
Before Open (4 Days)
7% 0% -0.13
WFC - Wells Fargo & Co Tue 14 Apr -
Before Open (9 Days)
2% -49% 0.73
JNJ - Johnson & Johnson Tue 14 Apr -
Before Open (9 Days)
1% -13.7% 2.18
JPM - JPMorgan Chase & Co Tue 14 Apr -
Before Open (9 Days)
1% -38.5% 2.70
LVS - Las Vegas Sands Corp Wed 15 Apr -
Before Open (10 Days)
3% -37.7% 0.32
BAC - Bank of America Corp Wed 15 Apr -
Before Open (10 Days)
2% -44% 0.70
UNH - UnitedHealth Group Inc Wed 15 Apr -
Before Open (10 Days)
2% -17.7% 3.60

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 (%)
PVH - PVH Corp Wed 1 Apr After Close (4 days ago) 4.44% 0% 0%
CAG - Conagra Brands Inc Tue 31 Mar Before Open (5 days ago) -4.08% 3.93% 5.4%
BB - BlackBerry Limited Tue 31 Mar After Close (5 days ago) 500% -18.64% -18.6%
RH - RH Mon 30 Mar After Close (6 days ago) 3.62% -14.86% -24.9%
SIG - Signet Jewelers Ltd Thu 26 Mar Before Open (10 days ago) 5.76% 29.88% -13.1%
LULU - Lululemon Athletica Inc Thu 26 Mar After Close (10 days ago) 1.33% -5.96% -8.6%
GME - GameStop Corp Thu 26 Mar After Close (10 days ago) 51.19% -4.31% -26.3%
KBH - KB Home Thu 26 Mar After Close (10 days ago) 46.51% -5.92% -13.4%
PAYX - Paychex Inc Wed 25 Mar Before Open (11 days ago) 2.11% 0.87% 1.8%

Earnings News

Walgreens saw sales surge, then drop off as coronavirus pandemic keeps customers indoors

Walgreens is one of the retailers where U.S. customers have gone in recent weeks to stock up on over-the-counter medications, prescriptions and items such as cleaning supplies and disposable gloves.

CNBC  Thu, 02 Apr 2020 11:30 GMT

Investors should expect a confusing earnings season ahead with delays and withdrawn forecasts

Analysts are expecting S&P 500 earnings growth to decline 5.2% in the first quarter, according to FactSet.

CNBC  Wed, 01 Apr 2020 18:50 GMT

Lululemon's earnings top estimates, but it won't provide outlook due to coronavirus

Lululemon announced Thursday fiscal fourth-quarter results that topped expectations, as its same-store sales surged 20% during the period.

CNBC  Thu, 26 Mar 2020 20:24 GMT

Nike sales beat analysts' estimates, but earnings fall, hurt by coronavirus pandemic

Nike reported quarterly sales that topped analysts' expectations, thanks to a boost from its digital business and growth in North America.

CNBC  Tue, 24 Mar 2020 20:42 GMT

Citadel turns 2020 profit after spotting virus risk early

Citadel has so far weathered the coronavirus market storm well, turning a slight profit in its flagship Wellington hedge fund for the year through Monday, according to a person familiar with the situation.

CNBC  Tue, 24 Mar 2020 13:04 GMT

Chevron cuts 2020 spending, Permian production forecasts

Chevron said on Tuesday it was lowering its forecasts for spending and Permian production by 20% for the year, and will suspend share buybacks as oil companies find themselves in one of the worst times in decades.

CNBC  Tue, 24 Mar 2020 11:05 GMT

Earnings are about to do something they haven't done since 2008 because of coronavirus

PNC Financial's Amanda Agati warns coronavirus fallout could dramatically hurt corporate America through the second quarter.

CNBC  Sun, 22 Mar 2020 21:01 GMT

Kohl's taps credit and withdraws earnings outlook because of coronavirus

Kohl's has withdrawn its earnings outlook for the current quarter and fiscal year, as it grapples with the hit it will take from the coronavirus pandemic.

CNBC  Thu, 19 Mar 2020 21:41 GMT

Olive Garden's parent beats on earnings but pulls outlook and dividend, draws down credit line

Darden Restaurants also withdrew its fiscal 2020 outlook and suspended its quarterly dividend due to the coronavirus crisis.

CNBC  Thu, 19 Mar 2020 11:26 GMT

FedEx suspends 2020 profit outlook, as coronavirus and turnaround pressure weigh

U.S. package delivery company FedEx suspended its 2020 profit outlook on Tuesday, citing the "significant impact" of the coronavirus, and said it would cut costs due to the uncertainty wrought by the pandemic.

CNBC  Wed, 18 Mar 2020 10:04 GMT

Nordstrom is closing all US stores because of coronavirus, withdraws 2020 outlook

Nordstrom's more than 360 stores in the U.S., Canada and Puerto Rico will be closed for two weeks.

CNBC  Tue, 17 Mar 2020 10:46 GMT

Slack stock tanks 20% after hours on weak guidance

Shares of the messaging software company plunged 20% in extended trading after plunging along with the market on Thursday.

CNBC  Thu, 12 Mar 2020 20:32 GMT

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