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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
COTY - Coty Inc. Today -
Before Open
7% -5.8% 0.14
KSS - Kohl's Corporation Today -
Before Open
5% -36.6% 1.65
MDT - Medtronic PLC Today -
Before Open
2% -5.5% 1.11
TJX - The TJX Companies, Inc. Today -
Before Open
2% 0% 1.05
PSTG - Pure Storage, Inc. Today -
After Close
8% -31.3% -0.27
URBN - Urban Outfitters, Inc. Today -
After Close
7% 0% 0.76
KEYS - Keysight Technologies Inc. Today -
After Close
5% -16.5% 0.73
LOW - Lowe's Companies, Inc. Tomorrow -
Before Open
3% -7.4% 2.02
TGT - Target Corporation Tomorrow -
Before Open
3% 0% 1.39

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 (%)
EL - The Estee Lauder Companies Inc. Mon 20 Aug Before Open (1 days ago) 8.93% 0% 0%
DE - Deere & Company Fri 17 Aug Before Open (4 days ago) -6.5% 2.36% -3.7%
WMT - Walmart Inc. Thu 16 Aug Before Open (5 days ago) 6.61% 0% 0%
NVDA - NVIDIA Corporation Thu 16 Aug After Close (5 days ago) 7.27% -4.9% -20.8%
JWN - Nordstrom, Inc. Thu 16 Aug After Close (5 days ago) 13.1% 13.2% -23.5%
AMAT - Applied Materials, Inc. Thu 16 Aug After Close (5 days ago) 3.45% -7.72% 17.9%
M - Macy's, Inc. Wed 15 Aug Before Open (6 days ago) 20.41% -15.95% -54.9%
WUBA - 58.com Inc. Wed 15 Aug After Close (6 days ago) 0% 0% 0%
CSCO - Cisco Systems, Inc. Wed 15 Aug After Close (6 days ago) 3.17% 2.96% -22.4%

Earnings News

Kohl's shares slide despite topping Wall Street earnings, sales expectations

Kohl's shares tumbled Tuesday morning despite releasing second-quarter earnings that beat analysts' profit and sales estimates. The retailer raised its profit outlook for the year, but it wasn't enough to please investors.

CNBC  Tue, 21 Aug 2018 11:23 GMT

Medtronic beats profit estimate on the strength of its cardio business

Medtronic posted a better-than-expected quarterly profit, helped by higher sales in its top-selling cardiac and vascular business.

CNBC  Tue, 21 Aug 2018 11:18 GMT

Rising costs, trade tensions weigh on shares of BHP

Concerns over rising costs and the impact of trade tensions between the U.S. and China weighed on shares of leading miner BHP.

CNBC  Tue, 21 Aug 2018 10:25 GMT

Toll Brothers profit tops estimates as home sales, prices rise

U.S. luxury home builder Toll Brothers on Tuesday topped Wall Street estimates for quarterly profit, as stronger housing demand helped it sell more homes at higher prices.

CNBC  Tue, 21 Aug 2018 09:35 GMT

Target and Lowe’s earnings are on tap this week. Experts say one big-box retailer is the better bet

Retail earnings are in full swing, and this week it's Lowe's and Target's turn as two of the big-box retailers report on their recent quarters. Only one looks a winner to these market watchers. 

CNBC  Mon, 20 Aug 2018 16:42 GMT

Clinique, La Mer skincare products boost Estee quarterly results

Estee Lauder topped quarterly profit and sales estimates on Monday as customers bought more of its namesake makeup and high-margin Clinique and La Mer skincare products at duty free stores, online and beauty-focused retailers.

CNBC  Mon, 20 Aug 2018 11:07 GMT

Applied Materials' weak forecast fans concerns over the end of the chip boom

Applied Materials' disappointing forecast is adding to fears that a two-year chip boom may be losing steam.

CNBC  Fri, 17 Aug 2018 10:55 GMT

Deere earnings miss amid higher costs

Deere reported weaker-than-expected earnings on Friday as rising costs take a bite out of the tractor company's bottom line.

CNBC  Fri, 17 Aug 2018 10:42 GMT

Nvidia tumbles on low revenue guidance

Nvidia beat expectations for its fiscal second quarter, but revenue guidance for the next quarter was low.

CNBC  Thu, 16 Aug 2018 20:30 GMT

Nordstrom shares soar on earnings beat, boosted by robust e-commerce sales growth

The department store chain also raises its profit outlook for the full year.

CNBC  Thu, 16 Aug 2018 20:07 GMT

JC Penney shares crater 26% on earnings miss, lowered forecast

J.C. Penney earnings report is the first since CEO Marvin Ellison stepped down amid the department store's struggles.

CNBC  Thu, 16 Aug 2018 11:43 GMT

JD.com's second-quarter revenue soars 31.2%, but misses estimates

JD.com, China's second largest e-commerce firm, reported a 31.2 percent rise in second-quarter revenue on Thursday.

CNBC  Thu, 16 Aug 2018 10:41 GMT

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