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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
VFC - VF Corp Today -
Before Open
4% 23.7% 0.58
LOW - Lowe's Companies Inc Today -
Before Open
3% 4% 1.33
TGT - Target Corp Today -
Before Open
3% -0.8% 1.42
ADI - Analog Devices Inc Today -
Before Open
2% -6.4% 1.30
VIPS - Vipshop Holdings Ltd Today -
After Close
10% 3.7% 0.13
CTRP - Ctrip.Com International Ltd Today -
After Close
7% 3% 0.10
NTAP - NetApp Inc Today -
After Close
6% 1.2% 1.13
LB - L Brands Inc Today -
After Close
4% -18.6% 0.00
BBY - Best Buy Co Inc Tomorrow -
Before Open
7% 14.1% 0.88

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 (%)
QD - Qudian Inc Mon 20 May Before Open (2 days ago) 26.32% -10.23% -10.2%
IGT - International Game Technology Mon 20 May Before Open (2 days ago) -47.83% -1.78% -1.8%
TTM - Tata Motors Ltd Mon 20 May Before Open (2 days ago) 17.07% 5.65% 5.6%
DE - Deere & Co Fri 17 May Before Open (5 days ago) -1.68% -7.65% -7.3%
KEM - KEMET Corp Thu 16 May Before Open (6 days ago) 10.99% 16.34% 5.1%
WMT - Walmart Inc Thu 16 May Before Open (6 days ago) 10.78% 1.43% 1.6%
NVDA - NVIDIA Corp Thu 16 May After Close (6 days ago) 11.67% -2.28% -5.3%
BIDU - Baidu Inc Thu 16 May After Close (6 days ago) 82.14% -16.52% -23.5%
AMAT - Applied Materials Inc Thu 16 May After Close (6 days ago) 6.06% 2.5% -3.1%

Earnings News

A wave of retail earnings reports shows department stores still can't grow sales

Kohl's, J.C. Penney and Nordstrom release disappointing earnings news, putting a damper on their sector.

CNBC  Tue, 21 May 2019 11:12 GMT

Home Depot earnings beat despite wet start to spring

The nation's largest home improvement retailer also reaffirms its guidance for fiscal 2019.

CNBC  Tue, 21 May 2019 10:00 GMT

Lumentum says it's halting all Huawei shipments; cuts its quarterly forecast

Mobile phone parts producer Lumentum on Monday was the first U.S. company to confirm formally it was halting shipments to Huawei, following export restrictions put in place by the U.S.

CNBC  Mon, 20 May 2019 13:07 GMT

Chip gear maker Applied Materials results beat estimates, shares rise

Applied Materials forecast third-quarter profit and revenue above estimates and reported better-than-expected quarterly results.

CNBC  Fri, 17 May 2019 12:38 GMT

The trade war will be a 'pain' for Apple's earnings, Nomura Instinet says, cutting estimates

Nomura Instinet lowers its price target on Apple shares, citing a coming "trade strain" on the company's earnings.

CNBC  Fri, 17 May 2019 11:41 GMT

Deere blames escalating trade war for worsening outlook

An escalating trade war between the U.S. and China threatens to hit U.S. exports of key commodities, hurting farm incomes and demand for Deere's equipment.

CNBC  Fri, 17 May 2019 11:10 GMT

Nvidia sees brief pop after earnings beat

Nvidia managed to beat estimates for earnings and revenue for its fiscal fourth quarter even as revenue was down some 31%.

CNBC  Thu, 16 May 2019 19:44 GMT

Pinterest shares plunge 15% after first earnings report on a weak outlook

Pinterest released its first-quarter 2019 earnings report after the bell on Thursday.

CNBC  Thu, 16 May 2019 19:33 GMT

Walmart earnings beat as investments fuel sales growth, in 'good position' to hit 2019 goals

Walmart has been pouring money into new technology that helps it more speedily fulfill online orders and grow its massive grocery business.

CNBC  Thu, 16 May 2019 10:09 GMT

WeWork urges investors to see losses as 'investments' as it reports quarterly loss of $264 million

WeWork has to convince public market investors that its losses are different than those of Uber or Lyft as the company prepares for its IPO.

CNBC  Wed, 15 May 2019 21:00 GMT

Cisco rises on strong revenue guidance

Cisco beat on top and bottom lines and delivered better-than-expected revenue guidance.

CNBC  Wed, 15 May 2019 20:17 GMT

Take-Two revenue forecast misses as competition from 'Fortnite' intensifies

Take-Two Interactive Software reported lower-than-expected revenue and forecast first-quarter sales below analysts' expectations.

CNBC  Tue, 14 May 2019 10:10 GMT

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