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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
ADBE - Adobe Systems Inc Today -
After Close
4% 2.9% 1.59
FDX - FedEx Corp Today -
After Close
3% 3.8% 3.20
KMX - Carmax Inc Tue 24 Sep -
Before Open (7 Days)
6% 3.6% 1.33
AZO - Autozone Inc Tue 24 Sep -
Before Open (7 Days)
3% 16.9% 21.74
NKE - Nike Inc Tue 24 Sep -
After Close (7 Days)
4% 6% 0.71
ACN - Accenture PLC Thu 26 Sep -
Before Open (9 Days)
3% 9.7% 1.71
MU - Micron Technology Inc Thu 26 Sep -
After Close (9 Days)
7% 49.8% 0.42
SFIX - Stitch Fix Inc Tue 1 Oct -
After Close (14 Days)
21% 0% 0.04
STZ - Constellation Brands Inc Thu 3 Oct -
Before Open (16 Days)
5% 0% 2.62

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 (%)
CIEN - Ciena Corp Thu 5 Sep Before Open (12 days ago) 28% -3.83% -4.1%
SIG - Signet Jewelers Ltd Thu 5 Sep Before Open (12 days ago) 96.15% 26.88% 27.5%
LULU - Lululemon Athletica Inc Thu 5 Sep After Close (12 days ago) 7.87% 7.82% 7.8%
MIK - Michaels Companies Inc Wed 4 Sep Before Open (13 days ago) 35.71% 11.79% 38.6%
AEO - American Eagle Outfitters Inc Wed 4 Sep Before Open (13 days ago) 21.88% -11.62% -1.7%
FNSR - Finisar Corp Wed 4 Sep After Close (13 days ago) 0% 0.66% 1.9%
PANW - Palo Alto Networks Inc Wed 4 Sep After Close (13 days ago) -29.63% 5.77% 7.7%
SFUN - Fang Holdings Ltd Fri 30 Aug Before Open (18 days ago) 0% -5.05% -14.2%
CPB - Campbell Soup Co Fri 30 Aug Before Open (18 days ago) 2.44% 3.9% 3.9%

Earnings News

Oracle CEO Mark Hurd to take a leave of absence for health reasons

Oracle's Mark Hurd, who was hired by founder Larry Ellison in 2010, is taking a leave of absence, the company said on Wednesday.

CNBC  Wed, 11 Sep 2019 20:12 GMT

GameStop shares tank after earnings miss, cuts sales forecast

Shares of GameStop tanked after the company reported second quarter earnings and sales that missed analysts' expectations.

CNBC  Tue, 10 Sep 2019 21:04 GMT

DocuSign rises more than 21% on revenue beat and strong guidance

The enterprise cloud company beat analyst expectations on revenue and provided strong guidance for the next quarter and full fiscal year.

CNBC  Fri, 06 Sep 2019 14:51 GMT

High-flying IPOs Crowdstrike, Zoom, and Medallia shares tank after quarterly results

Three of Wall Street's top-performing IPO stocks in 2019 tumbled after the companies' quarterly results failed to satisfy investors and justify their high valuations.

CNBC  Fri, 06 Sep 2019 10:20 GMT

Lululemon shares rise as growth in men's sales drives earnings beat

Lululemon in April said it plans to double its men's and online sales over the next five years, targeting annual revenue growth in the low teens during that time.

CNBC  Thu, 05 Sep 2019 20:11 GMT

Lululemon is rallying on earnings, and history points to another 17% surge ahead

Lululemon has done some heavy lifting this year. Two traders discuss whether there are more highs ahead.

CNBC  Thu, 05 Sep 2019 19:29 GMT

Slack plunges after posting first earnings report since going public

Slack's revenue got impacted in its first earnings report as a public company by service issues that caused the company to offer credits to customers.

CNBC  Wed, 04 Sep 2019 19:30 GMT

JetBlue slides after lowering guidance on Dorian impact, demand concerns

JetBlue says a key revenue metric might contract in the third quarter, partially due to the impact of Hurricane Dorian.

CNBC  Wed, 04 Sep 2019 12:03 GMT

Campbell Soup shares rise after beating profit estimates on cost cuts

Campbell Soup reports better-than-expected fourth-quarter profit, benefiting from cost cuts, sending shares climbing before the bell.

CNBC  Fri, 30 Aug 2019 12:47 GMT

Abercrombie & Fitch cuts full-year sales forecast on tariff impact

The apparel maker is grappling with the impact of increased U.S. tariffs on Chinese goods.

CNBC  Thu, 29 Aug 2019 12:21 GMT

Best Buy shares sink after quarterly sales miss and looming tariffs on core products weigh on stock

Investors were pessimistic even though Best Buy reported earnings that beat expectations by 9 cents and raised its guidance for the fiscal year.

CNBC  Thu, 29 Aug 2019 12:20 GMT

Dollar General soars, Dollar Tree slips as retailers raise forecasts, despite looming tariffs ahead

The outlook as well as a quarterly profit beat eased some concerns around the impact of the Trump administration's latest tariffs on some Chinese imports, including holiday merchandise.

CNBC  Thu, 29 Aug 2019 11:09 GMT

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