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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
CLF - Cleveland-Cliffs Inc Today -
Before Open
7% -12.8% -0.14
NOK - Nokia Corporation Today -
Before Open
6% -11.9% 0.03
DHI - D.R. Horton, Inc. Today -
Before Open
5% 21.9% 0.86
ALXN - Alexion Pharmaceuticals Inc Today -
Before Open
4% 3% 1.99
FCX - Freeport-McMoRan Inc. Today -
Before Open
4% 10.3% 0.07
TSCO - Tractor Supply Company Today -
Before Open
4% 16.1% 0.56
ABBV - AbbVie Inc Today -
Before Open
3% -8.4% 2.06
LUV - Southwest Airlines Co Today -
Before Open
3% 3.7% 0.61
NEM - Newmont Mining Corporation Today -
Before Open
3% -9% 0.26

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 (%)
NOW - ServiceNow, Inc. Wed 24 Apr Before Open (1 days ago) 111.11% -0.35% -0.3%
STM - STMicroelectronics N.V. Wed 24 Apr Before Open (1 days ago) -4.76% 2.37% 2.4%
DPZ - Domino's Pizza Inc Wed 24 Apr Before Open (1 days ago) 6.28% 4.89% 4.9%
BA - Boeing Co Wed 24 Apr Before Open (1 days ago) 1.61% 0.39% 0.4%
CAT - Caterpillar Inc Wed 24 Apr Before Open (1 days ago) 3.52% -3.03% -3%
BSX - Boston Scientific Corp Wed 24 Apr Before Open (1 days ago) -2.78% -1.25% -1.3%
SIRI - Sirius XM Holdings Inc. Wed 24 Apr Before Open (1 days ago) -40% -7.15% -7.2%
T - AT&T Inc Wed 24 Apr Before Open (1 days ago) 1.18% -4.08% -4.1%
CVE - Cenovus Energy Inc Wed 24 Apr Before Open (1 days ago) -61.54% -2.39% -2.4%

Earnings News

Altria's cannabis investment eats into first-quarter earnings, drives profit down 41%. Shares slide

Altria shares slid more than 5% after the company missed first-quarter earnings, revenue expectations.

CNBC  Thu, 25 Apr 2019 11:24 GMT

3M stock tumbles after company reports lower-than-expected earnings and cuts 2019 guidance

3M reports earnings and revenue that badly missed analysts' expectations and cut its full-year forecast.

CNBC  Thu, 25 Apr 2019 10:52 GMT

Southwest Airlines first-quarter earnings take a hit from 737 Max groundings, government shutdown

Southwest said it lost more than $200 million in revenue during the quarter.

CNBC  Thu, 25 Apr 2019 10:48 GMT

Comcast earnings beat estimates but sales fall short, high speed internet revenue up 10%

Closely watched data on new high-speed internet customers surpasses projections.

CNBC  Thu, 25 Apr 2019 10:31 GMT

Chipotle earnings top estimates as digital sales double, boosts same-store sales outlook

Chipotle Mexican Grill on Wednesday reported earnings and revenue that beat analysts' expectations after doubling its digital sales during the quarter.

CNBC  Wed, 24 Apr 2019 19:30 GMT

Tesla misses big on first-quarter earnings as demand fell for its electric cars

Executives braced investors for another loss in the second quarter before returning to profitability in the second half of the year.

CNBC  Wed, 24 Apr 2019 19:30 GMT

Microsoft hits $1 trillion market cap after earnings beat estimates

Microsoft kicked off tech earnings season and the stock jumped after revenue topped estimates.

CNBC  Wed, 24 Apr 2019 19:30 GMT

Facebook jumps as Stories users and ads show promising growth

Facebook said it took a one-time charge of $3 billion due to an ongoing Federal Trade Commission inquiry.

CNBC  Wed, 24 Apr 2019 19:30 GMT

Anthem beats earnings estimates, raises 2019 profit forecast

Anthem's first-quarter profit beat Wall Street estimates on Wednesday as it reined in expenses, and the U.S. health insurer raised its earnings forecast for the year.

CNBC  Wed, 24 Apr 2019 12:29 GMT

Facebook investors brace for an update from Zuckerberg on the company's planned pivot to privacy

With Facebook set to release quarterly results Wednesday afternoon, Wall Street wants to know how well the company is preparing to make money beyond ads.

CNBC  Wed, 24 Apr 2019 12:00 GMT

Domino's shares jump after earnings beat, shrugging off slowing sales

Domino's Pizza reports quarterly earnings topped analysts' expectations but sales fell short.

CNBC  Wed, 24 Apr 2019 11:40 GMT

Tesla earnings in the spotlight as investors look for clues about demand, Model 3 margins

Tesla investors await updates on service improvements, the Shanghai Gigafactory and Model 3 margins.

CNBC  Wed, 24 Apr 2019 11:30 GMT

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