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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
MTOR - Meritor, Inc. Today -
Before Open
7% -18.4% 0.78
M - Macy's Inc Today -
Before Open
5% -14.4% 0.14
CSCO - Cisco Systems Inc Today -
After Close
6% 2.9% 0.66
NTAP - NetApp Inc Today -
After Close
6% -4.3% 0.87
ZTO - ZTO EXPRESS INC Today -
After Close
4% -19.5% 0.18
WPM - Silver Wheaton Corp Today -
After Close
3% -21.1% 0.10
WUBA - 58.com Inc Tomorrow -
Before Open
7% 0.5%
WMT - Walmart Inc Tomorrow -
Before Open
3% 14.1% 1.02
NVDA - NVIDIA Corp Tomorrow -
After Close
7% -22.6% 1.73

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 (%)
AAP - Advance Auto Parts Inc Tue 13 Nov Before Open (1 days ago) 6.78% 10.57% 10.6%
TSN - Tyson Foods, Inc. Tue 13 Nov Before Open (1 days ago) 18.8% -5.58% -5.6%
HD - The Home Depot, Inc. Tue 13 Nov Before Open (1 days ago) 10.57% -0.24% -0.2%
ATHM - Autohome Inc Mon 12 Nov Before Open (2 days ago) 7.14% -6.12% 2.8%
ADNT - Adient PLC Fri 9 Nov Before Open (5 days ago) 3.17% -25.36% -15.1%
COMM - CommScope Holding Company Inc Thu 8 Nov Before Open (6 days ago) -12.7% -20.13% -24.4%
ENDP - Endo International plc Thu 8 Nov Before Open (6 days ago) 20.34% -17.72% -15.7%
SBH - Sally Beauty Holdings Inc Thu 8 Nov Before Open (6 days ago) 6.25% 20.22% 10.4%
UPL - Ultra Petroleum Corp. Thu 8 Nov Before Open (6 days ago) 13.33% -1.27% 14.6%

Earnings News

Macy's earnings beat estimates as retailer raises forecast with hopes for strong holiday

Macy's has been testing new technology and other concepts like mini marketplaces in stores to lure shoppers and grow sales.

CNBC  Wed, 14 Nov 2018 12:30 GMT

The world's largest shipping firm warns that the US-China trade war has hit demand

Maersk said the effect of trade tensions could reduce global container trade between 0.5 and 2 percent during 2019 and 2020.

CNBC  Wed, 14 Nov 2018 08:17 GMT

Blue Apron to reduce workforce by 4% in push to reach profitability in 2019

Blue Apron will reduce its workforce by 4 percent as the company aims to become profitable in 2019, the meal kit company announced Tuesday.

CNBC  Tue, 13 Nov 2018 21:55 GMT

Marijuana producer Tilray says revenue surged more than 85 percent last quarter

Marijuana producer Tilray reported quarterly earnings that beat analysts' expectations on Tuesday, though total revenues fell just shy of estimates.

CNBC  Tue, 13 Nov 2018 21:25 GMT

SurveyMonkey reports 18% revenue increase during its first quarter as a public company

Tuesday marks the company's first earnings report since debuting on the Nasdaq in October.

CNBC  Tue, 13 Nov 2018 21:10 GMT

Nvidia's earnings report will disappoint this week, analyst says, but he's upgrading anyway

Susquehanna's Christopher Rolland upgraded Nvidia to positive from neutral even though he said the 'odds of a guidance miss are high' when the chipmaker reports earnings Thursday after the bell.

CNBC  Tue, 13 Nov 2018 12:44 GMT

Bayer quarterly profit is flat as weak animal health offsets strong Xarelto

Bayer's adjusted core earnings were flat for the quarter, as better prescription numbers for cardiovascular drug Xarelto were tempered by a weaker animal health business and a strong euro weighing on the value of overseas sales.

CNBC  Tue, 13 Nov 2018 11:28 GMT

Home Depot beats earnings estimates and raises sales outlook as consumers keep spending on homes

Home Depot reports quarterly earnings that beat analysts' expectations and raises its sales outlook for the full year.

CNBC  Tue, 13 Nov 2018 10:28 GMT

Here's what every major analyst said about Disney's earnings and its new streaming service

Though analysts are impressed with Disney's studio revenue, which grew 50 percent from the prior year, many focus on its new over-the-top strategy known as Disney+.

CNBC  Fri, 09 Nov 2018 13:38 GMT

Activision Blizzard falls 10 percent after reporting decline in monthly active users

Activision Blizzard shares fell 10 percent during after-hours trading Thursday as the video game company missed estimates on fourth-quarter revenue projections but beat third quarter earnings-per-share predictions.

CNBC  Thu, 08 Nov 2018 22:36 GMT

Dropbox rises after beating estimates on revenue and earnings

Dropbox stock rose more than 9 percent after the company beat estimates on third-quarter revenue and profit.

CNBC  Thu, 08 Nov 2018 21:15 GMT

Yelp shares drop 30% after revenue misses expectations, weak outlook

Shares of Yelp tanked more than 28 percent Thursday after the company announced its third quarter earnings report.

CNBC  Thu, 08 Nov 2018 21:12 GMT

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