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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
TIF - Tiffany & Co Today -
Before Open
5% -7.5% 1.60
RHT - Red Hat Inc Mon 25 Mar -
After Close (3 Days)
6% 3.4% 0.77
CCL - Carnival Corporation Tue 26 Mar -
Before Open (4 Days)
3% 2.8% 0.44
CRON - Cronos Group Inc. Tue 26 Mar -
Before Open (4 Days)
2% 0% -0.01
LULU - Lululemon Athletica Inc Wed 27 Mar -
After Close (5 Days)
9% 9.8% 1.74
FIVE - Five Below Inc Wed 27 Mar -
After Close (5 Days)
7% 11.3% 1.57
ACN - Accenture PLC Thu 28 Mar -
Before Open (6 Days)
3% 10.1% 1.57
BB - BlackBerry Limited Fri 29 Mar -
Before Open (7 Days)
9% 27.5% -0.01
KMX - Carmax Inc Fri 29 Mar -
Before Open (7 Days)
6% 6.9% 1.04

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 (%)
GIS - General Mills Inc Wed 20 Mar Before Open (2 days ago) 20.29% 2.22% 2.2%
MU - Micron Technology Inc Wed 20 Mar After Close (2 days ago) 0% 0% 0%
WSM - Williams-Sonoma Inc Wed 20 Mar After Close (2 days ago) 6.6% 0% 0%
WPM - Silver Wheaton Corp Wed 20 Mar After Close (2 days ago) 60% 0% 0%
DSW - DSW Inc Tue 19 Mar Before Open (3 days ago) -333.33% -12.89% -16.2%
MIK - Michaels Companies Inc Tue 19 Mar Before Open (3 days ago) 1.05% 8.48% 1.7%
MBT - Mobile TeleSystems OJSC Tue 19 Mar Before Open (3 days ago) 0% -0.84% -3.3%
QD - Qudian Inc Mon 18 Mar Before Open (4 days ago) 0% 2.99% 1.1%
HDS - HD Supply Holdings Inc Mon 18 Mar After Close (4 days ago) 5.26% -3.87% -2.2%

Earnings News

Tiffany shares fall as holiday-quarter sales miss expectations

Tiffany reports a 1 percent drop in sales during the holiday quarter, citing "external challenges and uncertainties."

CNBC  Fri, 22 Mar 2019 11:01 GMT

Nike shares fall after North American sales growth disappoints

Nike's momentum continues overseas, as it still looks for pockets of growth in North America, like women's apparel.

CNBC  Thu, 21 Mar 2019 19:37 GMT

Guess shares tumble on earnings shortfall as Levi Strauss IPO looms

Shares of clothing company Guess tanked more than 12 percent after reporting earnings that missed analyst expectations.

CNBC  Thu, 21 Mar 2019 12:29 GMT

Shares of Olive Garden parent Darden jump after earnings, revenue beat

Darden Restaurants, Olive Garden's parent company, reported earnings Thursday before the bell.

CNBC  Thu, 21 Mar 2019 11:31 GMT

Micron says memory chip recovery is coming later in the year, sending shares higher

Micron Technology said it sees a recovery in the memory chip market coming and reported a quarterly profit that beat estimates as cost controls helped offset falling demand and prices.

CNBC  Thu, 21 Mar 2019 10:45 GMT

South Korean semiconductor stocks surge on the back of Micron earnings

Shares of semiconductors companies in South Korea soared during Thursday's trading session after earnings results from Micron.

CNBC  Thu, 21 Mar 2019 05:07 GMT

General Mills stock jumps after earnings beat and raised outlook

Shares of General Mills jump 3.5 percent after the company reports an earnings beat.

CNBC  Wed, 20 Mar 2019 12:36 GMT

Tencent Music's first earnings report exposes soaring licence and production costs

Chinese streaming firm Tencent Music delivered its first earnings report as a public company, meeting market expectations but exposing soaring licence and content production costs.

CNBC  Wed, 20 Mar 2019 10:21 GMT

BMW issued a bleak 2019 profit warning and launched a $13.6 billion cost-cutting plan

BMW said it expected group pretax profit to fall by more than 10 percent in 2019 and announced a sweeping $13.6 billion cost savings and efficiency plan.

CNBC  Wed, 20 Mar 2019 10:13 GMT

FedEx just warned the whole globe is slowing

A top executive at FedEx is flagging serious concerns in the global economy.

CNBC  Tue, 19 Mar 2019 20:34 GMT

FedEx misses on earnings and slashes full-year guidance, citing slowing global trade — stock falls

FedEx issued weak full-year 2019 earnings guidance, the second time it has slashed its outlook since December.

CNBC  Tue, 19 Mar 2019 19:53 GMT

Ulta Beauty shares climb after earnings, revenue top expectations

Shares of Ulta Beauty rose following the release of the beauty company's better-than-expected fourth-quarter earnings.

CNBC  Fri, 15 Mar 2019 09:48 GMT

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