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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
ATI - Allegheny Technologies Inc Tue 22 Jan -
Before Open (2 Days)
6% -6.9% 0.33
EDU - New Oriental Education & Technology Group Inc Tue 22 Jan -
Before Open (2 Days)
5% 2.1% -0.05
STLD - Steel Dynamics Inc Tue 22 Jan -
Before Open (2 Days)
3% -17.1% 1.25
HAL - Halliburton Co Tue 22 Jan -
Before Open (2 Days)
2% -17.7% 0.37
FITB - Fifth Third Bancorp Tue 22 Jan -
Before Open (2 Days)
2% 4.1% 0.67
JNJ - Johnson & Johnson Tue 22 Jan -
Before Open (2 Days)
1% -3.6% 1.95
IBM - International Business Machines Corp Tue 22 Jan -
After Close (2 Days)
3% -15.8% 4.81
COF - Capital One Financial Corp Tue 22 Jan -
After Close (2 Days)
3% -3.9% 2.40
ZION - Zions Bancorp Tue 22 Jan -
After Close (2 Days)
3% 2.7% 1.06

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 (%)
VFC - VF Corp Fri 18 Jan Before Open (2 days ago) 20.18% 0% 0%
RF - Regions Financial Corp Fri 18 Jan Before Open (2 days ago) -2.63% 0% 0%
SLB - Schlumberger NV Fri 18 Jan Before Open (2 days ago) 0% 0% 0%
STI - SunTrust Banks Inc Fri 18 Jan Before Open (2 days ago) 7.14% 0% 0%
CFG - Citizens Financial Group Inc Fri 18 Jan Before Open (2 days ago) 4.26% 4.51% 11.8%
MTG - MGIC Investment Corp Thu 17 Jan Before Open (3 days ago) 13.51% 1.04% 23.9%
FAST - Fastenal Co Thu 17 Jan Before Open (3 days ago) 0% 5.95% -13.5%
MS - Morgan Stanley Thu 17 Jan Before Open (3 days ago) -18.89% -4.41% 13.4%
BBT - BB&T Corp Thu 17 Jan Before Open (3 days ago) 0.96% 1.56% 3.3%

Earnings News

Tiffany holiday sales fall as dollar crimps Chinese tourists' spending

Tiffany said on Friday that its worldwide same-store sales fell 2 percent during the holiday season, leading the upscale jeweler to temper its expectation for full-year profit.

CNBC  Fri, 18 Jan 2019 12:24 GMT

Netflix beats on subscriber growth, but misses slightly on revenue — stock falls after hours

The company is guiding toward lower-than-expected results for the first quarter of 2019.

CNBC  Thu, 17 Jan 2019 20:29 GMT

The major bank earnings reports are all in and Morgan Stanley was the biggest loser

Sharp market declines in December showed that, while they've made progress diversifying their businesses, big banks like Morgan Stanley are still exposed to the whims of the market.

CNBC  Thu, 17 Jan 2019 16:44 GMT

Big expectations for Netflix earnings after the bell — here's what major analysts are predicting

Just days after raising prices, Netflix reports earnings after the bell and Wall Street is raising its expectations into the release.

CNBC  Thu, 17 Jan 2019 15:59 GMT

CSX shares fall after the railroad operator forecast less robust revenue growth for 2019

CSX on Wednesday reported quarterly profit that topped Wall Street's expectations, but shares fell 2 percent after the No. 3 railroad operator forecast less robust revenue growth for 2019.

CNBC  Thu, 17 Jan 2019 12:47 GMT

Alcoa shares drop after it did not provide a closely watched profit measure for the full year

Top U.S. aluminum producer Alcoa beat Wall Street estimates for quarterly profit on Wednesday, buoyed by strength in its alumina segment.

CNBC  Thu, 17 Jan 2019 12:39 GMT

Morgan Stanley shares slide after disappointment on weak trading, wealth management

Morgan Stanley's two biggest businesses suffered declines amid last year's whipsawing markets.

CNBC  Thu, 17 Jan 2019 11:35 GMT

Ford forecasts weaker-than-expected fourth quarter profit

Ford Motor on Wednesday offered a fourth-quarter earnings forecast that was below Wall Street's expectations.

CNBC  Wed, 16 Jan 2019 11:56 GMT

Goldman Sachs shares surge after fourth-quarter profit tops expectations

Goldman Sachs beat profit and revenue expectations, powered by better-than-expected investment banking fees and interest income.

CNBC  Wed, 16 Jan 2019 11:11 GMT

BlackRock profit results fall short of expectations, assets fall back below $6 trillion

But BlackRock's revenue reported quarterly revenue that slightly exceed analyst expectations.

CNBC  Wed, 16 Jan 2019 11:10 GMT

Bank of America shares jump 7% after record earnings report

Bank of America's better-than-expected earnings report was driven by a strong performance from its consumer-banking business and lower taxes.

CNBC  Wed, 16 Jan 2019 11:09 GMT

Nordstrom says sales at some stores 'below expectations' this holiday season

Nordstrom said it now expects its diluted earnings per share for fiscal 2018 to fall on the low end of a prior range of $3.27 to $3.37.

CNBC  Tue, 15 Jan 2019 23:53 GMT

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