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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
QD - Qudian Inc Today -
Before Open
8% -35.4%
DE - Deere & Co Today -
Before Open
3% 3.8% 2.43
NTNX - Nutanix Inc Tue 27 Nov -
After Close (6 Days)
9% -36.2% -0.53
CRM - Salesforce.com Inc Tue 27 Nov -
After Close (6 Days)
5% -21.8% 0.15
CHS - Chico's FAS Inc Wed 28 Nov -
Before Open (7 Days)
7% -19.9% 0.09
SINA - Sina Corporation Wed 28 Nov -
Before Open (7 Days)
6% -24.5% 0.46
DKS - Dick's Sporting Goods Inc Wed 28 Nov -
Before Open (7 Days)
6% -2.7% 0.26
TIF - Tiffany & Co Wed 28 Nov -
Before Open (7 Days)
5% -21% 0.76
BURL - Burlington Stores Inc Wed 28 Nov -
Before Open (7 Days)
5% -5.9% 1.06

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 (%)
PSTG - Pure Storage Inc Mon 19 Nov After Close (2 days ago) 23.08% 0% 0%
NUAN - Nuance Communications, Inc. Mon 19 Nov After Close (2 days ago) 22.73% 0% 0%
URBN - Urban Outfitters Inc Mon 19 Nov After Close (2 days ago) 11.11% 0% 0%
LB - L Brands Inc Mon 19 Nov After Close (2 days ago) 6.67% 0% 0%
VIAB - Viacom Inc. Fri 16 Nov Before Open (5 days ago) 4.21% 3.64% -1.3%
WMT - Walmart Inc Thu 15 Nov Before Open (6 days ago) 5.88% -1.96% -4.7%
NVDA - NVIDIA Corp Thu 15 Nov After Close (6 days ago) -3.47% -18.76% -28.5%
JWN - Nordstrom Inc Thu 15 Nov After Close (6 days ago) 4.69% -13.66% -13.1%
WSM - Williams-Sonoma Inc Thu 15 Nov After Close (6 days ago) 1.06% -11.23% -12.9%

Earnings News

Gap's comparable sales miss as its namesake brand struggles

Gap reported quarterly same-store sales below analysts' estimates on Tuesday, dragged down by another weak performance in its namesake brand.

CNBC  Wed, 21 Nov 2018 10:55 GMT

Campbell Soup tops analyst expectations ahead of contested shareholder vote

Campbell Soup reports quarterly earnings and revenue that beat analysts' expectations. The soup company is locked in a proxy fight with activist firm Third Point.

CNBC  Tue, 20 Nov 2018 12:59 GMT

Kohl's earnings top estimates but shares plunge as outlook disappoints

Kohl's reports quarterly earnings and revenue that topped analysts' expectations. While it also raised its profit forecast for the year, it was on the low end of what Wall Street had been calling for, and shares plunge.

CNBC  Tue, 20 Nov 2018 12:37 GMT

Medtronic reports 6% rise in quarterly revenue

Medical device maker Medtronic reported a 6 percent rise in quarterly revenue on Tuesday, helped by higher sales in its cardiac and vascular business.

CNBC  Tue, 20 Nov 2018 12:03 GMT

Lowe's earnings beat, but retailer cuts forecast as it moves to exit some businesses

Lowe's reports quarterly earnings and revenue that beat expectations, though same-store sales were softer than anticipated and the company lowers its full-year estimates. 

CNBC  Tue, 20 Nov 2018 11:03 GMT

Target shares tumble 9% as earnings miss mark, weighed down by higher costs

Target's investments in its supply chain weighed on profits, but the retailer says it's now "better positioned for this holiday season than ever before."

CNBC  Tue, 20 Nov 2018 10:58 GMT

L Brands falls after cutting annual dividend in half

The company, known for its brands Victoria's Secret and Bath & Body Works, beat profit expectations.

CNBC  Mon, 19 Nov 2018 22:20 GMT

China's JD.com feels pressure as sales of big ticket items slow

Chinese e-commerce firm JD.com's shares came under further pressure on Monday after the company reported its slowest quarterly revenue growth since its initial public offering in 2014.

CNBC  Mon, 19 Nov 2018 13:20 GMT

JC Penney shares dive as sales fall short despite narrower-than-expected loss

J.C. Penney in October filled its vacant CEO role with Jill Soltau, former CEO of Joann Stores. Soltau came after a string of executive departures, including former J.C. Penney CEO Marvin Ellison and CFO Jeffrey Davis.

CNBC  Thu, 15 Nov 2018 13:06 GMT

Walmart raises earnings forecast, expecting strong holiday sales

Walmart has been making investments in its stores, online and internationally to keep pace with arguably its biggest rival of all, Amazon. 

CNBC  Thu, 15 Nov 2018 10:58 GMT

Cisco beats first-quarter estimates, meets guidance expectations

Cisco beat expectations for the fiscal first quarter and met expectations for the next quarter.

CNBC  Wed, 14 Nov 2018 21:16 GMT

Uber growth slowed and losses widened between Q2 and Q3, as company expands into new businesses

Uber's losses have ticked up and growth has slowed from last quarter, according to the company's self-reported financials. 

CNBC  Wed, 14 Nov 2018 21:00 GMT

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