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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
HAS - Hasbro Inc Today -
Before Open
5% 14.6% 0.29
HAL - Halliburton Co Today -
Before Open
2% -17.4% 0.59
HLX - Helix Energy Solutions Group Inc Today -
After Close
7% 0% 0.06
WHR - Whirlpool Corp Today -
After Close
6% 7.5% 3.63
GOOG - Alphabet Inc. Today -
After Close
5% 0%
CDNS - Cadence Design Systems Inc Today -
After Close
4% 16.8% 0.23
ZION - Zions Bancorp Today -
After Close
3% -13.7% 0.92
STLD - Steel Dynamics Inc Today -
After Close
3% -20.2% 1.49
AMTD - TD Ameritrade Holding Corp Today -
After Close
2% -18.4% 0.79

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 (%)
CLF - Cliffs Natural Resources Inc Fri 20 Jul Before Open (3 days ago) 35.71% 12.67% -31.1%
VFC - VF Corp Fri 20 Jul Before Open (3 days ago) 34.38% 4.15% -21.7%
RF - Regions Financial Corp Fri 20 Jul Before Open (3 days ago) 3.03% 1.14% -11.5%
HON - Honeywell International Inc Fri 20 Jul Before Open (3 days ago) 5.47% 3.79% -2%
SLB - Schlumberger NV Fri 20 Jul Before Open (3 days ago) 2.38% -1.24% -4.2%
STI - SunTrust Banks Inc Fri 20 Jul Before Open (3 days ago) 14.62% 2.64% -12.6%
CFG - Citizens Financial Group Inc Fri 20 Jul Before Open (3 days ago) 2.33% -1.13% -6.8%
BHGE - Baker Hughes, a GE company Fri 20 Jul Before Open (3 days ago) -23.08% 0.69% -0.9%
DPZ - Domino's Pizza Inc Thu 19 Jul Before Open (4 days ago) 5.14% -2.44% -35.9%

Earnings News

General Electric CFO: Strength in all businesses except power

General Electric sees strength in all its businesses excluding power, chief financial officer Jamie Miller told CNBC's Morgan Brennan. 

CNBC  Fri, 20 Jul 2018 15:13 GMT

Vans shoe maker VF Corp's quarterly results top estimates

VF also raised its full-year earnings forecast, as demand for its high-margin Vans shoes soared.

CNBC  Fri, 20 Jul 2018 13:26 GMT

Amazon, Alphabet and Facebook — more than $2 trillion in market cap — report next week

Alphabet, Facebook and Amazon are all reporting earnings next week, with a combined market cap of $2.27 trillion. With a slew of earnings reports this massive on tap, Stacey Gilbert of Susquehanna explains what investors can expect.

CNBC  Fri, 20 Jul 2018 11:29 GMT

Honeywell profit beats on higher demand for aircraft parts

Honeywell also raised its 2018 earnings forecast for the third time.

CNBC  Fri, 20 Jul 2018 11:06 GMT

General Electric shares fall after profit drops 30%

GE reports second quarter 30 percent profit drop from last year because of weakness in its power division.

CNBC  Fri, 20 Jul 2018 10:20 GMT

Skechers drops more than 25% after earnings miss

The footwear maker reported EPS that fell well below expectations for the second quarter.

CNBC  Thu, 19 Jul 2018 20:11 GMT

Microsoft shares jump on strong revenue forecast

Microsoft beat expectations for the last quarter of its 2018 fiscal year, but reported slower growth in its Commercial Cloud, which includes Azure.

CNBC  Thu, 19 Jul 2018 19:33 GMT

Chipmaker Taiwan Semiconductor cuts revenue outlook again on cryptocurrency gloom

Taiwan Semiconductor trimmed its annual revenue and capital spending estimates.

CNBC  Thu, 19 Jul 2018 14:52 GMT

eBay stock has worst day in nearly two years after weak growth, lowered revenue forecast

Shares of eBay fell over 10 percent in trading Thursday after the company reported sluggish growth in its marketplace business. 

CNBC  Thu, 19 Jul 2018 14:41 GMT

Danaher to spin off dental unit, posts earnings beat; shares rise

Danaher said it would spin off its dental unit into a publicly traded company, as the medical equipment maker seeks to revitalize a struggling business.

CNBC  Thu, 19 Jul 2018 14:15 GMT

Insurer Travelers misses profit estimates on storm losses

Travelers results were hurt by costly damage from wind and hail storms that pounded several U.S. regions in recent months.

CNBC  Thu, 19 Jul 2018 14:01 GMT

Blackstone posts 55 percent rise in second-quarter earnings

Blackstone, the largest manager of alternative assets such as private equity and real estate, said second-quarter earnings per share rose 55 percent from one year ago.

CNBC  Thu, 19 Jul 2018 11:29 GMT

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