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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
HAS - Hasbro Inc Mon 22 Oct -
Before Open (2 Days)
5% 4.4% 2.24
PII - Polaris Industries Inc. Mon 22 Oct -
Before Open (2 Days)
5% -24.7% 1.57
HAL - Halliburton Co Mon 22 Oct -
Before Open (2 Days)
2% -16.9% 0.49
HLX - Helix Energy Solutions Group Inc Mon 22 Oct -
After Close (2 Days)
7% 17.3% 0.12
CDNS - Cadence Design Systems Inc Mon 22 Oct -
After Close (2 Days)
4% -11.2% 0.23
AMTD - TD Ameritrade Holding Corp Mon 22 Oct -
After Close (2 Days)
2% -14.5% 0.88
ZION - Zions Bancorp Mon 22 Oct -
After Close (2 Days)
2% -12.7% 0.96
SLCA - U.S. Silica Holdings, Inc. Tue 23 Oct -
Before Open (3 Days)
7% -40.3% 0.62
ATI - Allegheny Technologies Inc Tue 23 Oct -
Before Open (3 Days)
6% -0.2% 0.38

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 (%)
CLF - Cleveland-Cliffs Inc Fri 19 Oct Before Open (1 days ago) -3.03% -3.75% -3.7%
IPG - Interpublic Group of Companies Inc Fri 19 Oct Before Open (1 days ago) 4.35% 9.65% 9.7%
VFC - VF Corp Fri 19 Oct Before Open (1 days ago) 7.52% -10.71% -10.7%
SYF - Synchrony Financial Fri 19 Oct Before Open (1 days ago) 13.75% 5.8% 5.8%
PG - Procter & Gamble Co Fri 19 Oct Before Open (1 days ago) 2.75% 8.8% 8.8%
HON - Honeywell International Inc Fri 19 Oct Before Open (1 days ago) 2.01% -1.11% -1.1%
SLB - Schlumberger NV Fri 19 Oct Before Open (1 days ago) 2.22% 0.07% 0.1%
STI - SunTrust Banks Inc Fri 19 Oct Before Open (1 days ago) 2.9% 2.11% 2.1%
CFG - Citizens Financial Group Inc Fri 19 Oct Before Open (1 days ago) 3.33% 4.15% 4.2%

Earnings News

Procter & Gamble shares jump 7% on biggest quarterly sales gain in 5 years

The maker of everyday household goods like Tide laundry detergent, Pantene hair products, Crest toothpaste and Charmin toilet paper has been defending its market share against heightened competition from private-label brands and upstarts.

CNBC  Fri, 19 Oct 2018 10:34 GMT

American Express shares rise after third-quarter earnings top Street on record revenue

American Express reports third quarter results that beat expectations as consumers and small businesses spend more.

CNBC  Thu, 18 Oct 2018 19:33 GMT

PayPal jumps after reporting a beat on the top and bottom lines, growth in Venmo

PayPal reported third-quarter earnings and revenue that topped Wall Street estimates on Thursday.

CNBC  Thu, 18 Oct 2018 19:33 GMT

Textron profit misses on lower aircraft sales

Cessna business jet maker Textron reported a lower-than-expected quarterly profit on Thursday.

CNBC  Thu, 18 Oct 2018 11:13 GMT

Alcoa's profit beat fueled by rising alumina prices, shares rise

Alcoa reported a better-than-expected quarterly profit, as a series of supply hits boosted alumina prices.

CNBC  Thu, 18 Oct 2018 10:02 GMT

Winnebago CEO: RV demand is healthy, but rate hikes and tariffs could add pressure

RV manufacturer Winnebago reported better-than-expected Q4 earnings, despite a year downturn. The company's CFO said that aluminum and steel prices are squeezing margins. Winnebago has had to increase prices to offset some of the cost.

CNBC  Wed, 17 Oct 2018 22:47 GMT

Sealed Air falls 6% after previewing disappointing earnings, slashing profit outlook

CEO Ted Doheny said in a statement that higher raw material and freight costs, along with foreign exchange pressures, impacted profitability.

CNBC  Wed, 17 Oct 2018 21:36 GMT

IBM closes down more than 7% after revenue miss

The company's overall revenue for its third quarter was down 2 percent year over year.

CNBC  Wed, 17 Oct 2018 13:35 GMT

United Airlines' shares jump 6% as strong travel demand offsets higher fuel prices

United shares surged Wednesday after the third-largest U.S. carrier raised its profit outlook for the year on higher fuel costs. 

CNBC  Wed, 17 Oct 2018 13:13 GMT

US Bancorp profit beats on higher interest income, loan growth

Regional lender U.S. Bancorp reported a 17 percent rise in quarterly profit on Wednesday, driven by higher interest income and lower taxes.

CNBC  Wed, 17 Oct 2018 11:25 GMT

Netflix shares soar as Wall Street gushes over strong subscriber growth

Netflix raked in almost 7 million subscribers in the third quarter, with the vast majority of those coming from overseas.

CNBC  Wed, 17 Oct 2018 11:02 GMT

Railroad operator CSX's quarterly profit tops Wall Street target

CSX on Tuesday reported quarterly profit that topped Wall Street's view and raised its full-year revenue forecast.

CNBC  Wed, 17 Oct 2018 10:17 GMT

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