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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
VST - Mon 26 Feb -
Before Open (2 Days)
1% -0.5% 0.03
FIT - Fitbit Inc Mon 26 Feb -
After Close (2 Days)
14% -15.5% -0.06
PANW - Palo Alto Networks Inc Mon 26 Feb -
After Close (2 Days)
7% 16.1% -0.21
EXEL - Exelixis Inc Mon 26 Feb -
After Close (2 Days)
5% 21.8% 0.12
THC - Tenet Healthcare Corp Mon 26 Feb -
After Close (2 Days)
5% 49.8% 1.30
OKE - ONEOK Inc Mon 26 Feb -
After Close (2 Days)
2% 6.9% 0.51
IONS - Ionis Pharmaceuticals Inc Tue 27 Feb -
Before Open (3 Days)
7% -5.9% -0.08
MNK - Mallinckrodt Plc Tue 27 Feb -
Before Open (3 Days)
6% -48.2% 1.72
ENDP - Endo International PLC Tue 27 Feb -
Before Open (3 Days)
6% 12.6% 0.62

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 (%)
BUFF - Blue Buffalo Pet Products Inc Fri 23 Feb Before Open (1 days ago) 14.29% 17.23% 17.2%
KBR - KBR Inc Fri 23 Feb Before Open (1 days ago) -6.67% -15.58% -15.6%
COG - Cabot Oil & Gas Corp Fri 23 Feb Before Open (1 days ago) 33.33% 2.43% 2.4%
HUN - Huntsman Corp Fri 23 Feb Before Open (1 days ago) 15.15% 0.96% 1%
PEG - Public Service Enterprise Group Inc Fri 23 Feb Before Open (1 days ago) 1.79% 2.75% 2.7%
W - Wayfair Inc Thu 22 Feb Before Open (2 days ago) -5.06% -22.72% -21.4%
SGMO - Sangamo Therapeutics Inc Thu 22 Feb Before Open (2 days ago) 16.67% 14.41% 12.4%
LDOS - Leidos Holdings Inc Thu 22 Feb Before Open (2 days ago) 4.82% 0.83% 1%
CHK - Chesapeake Energy Corp Thu 22 Feb Before Open (2 days ago) 20% 21.67% 21.7%

Earnings News

Hewlett Packard Enterprise stock soars on earnings beat

Hewlett Packard Enterprise skyrocketed after the company reported Q1 results that blasted past analysts' expectations.

CNBC  Thu, 22 Feb 2018 18:42 GMT

Cheesecake Factory meets its fourth-quarter profit forecasts

The Cheesecake Factory reported fourth-quarter earnings of $57.7 million, matching analysts' expectations.

CNBC  Thu, 22 Feb 2018 11:01 GMT

'Angry Birds' maker Rovio pummeled after profit warning

The warning wiped more than a third off the Finnish firm's stock price amid deepening doubts about its valuation.

CNBC  Thu, 22 Feb 2018 09:52 GMT

Roku plunges after providing a weak sales forecast

Roku plunged on weak quarterly guidance.

CNBC  Wed, 21 Feb 2018 21:33 GMT

Domino's Pizza same-store sales miss estimates, sending shares lower

Domino's Pizza reported a rise in fourth-quarter same-store sales and revenue, but the growth did not meet analysts' estimates.

CNBC  Tue, 20 Feb 2018 16:37 GMT

Medtronic's quarterly profit meets expectations

Medtronic reported earnings in-line with analysts' estimates, as sales across all its units, except the minimally invasive therapies business, grew.

CNBC  Tue, 20 Feb 2018 12:51 GMT

Home Depot earnings, sales top Wall Street expectations as traffic spikes

Home Depot continues to thrive alongside its rival Lowe's, as their business models are much more difficult to replicate online.

CNBC  Tue, 20 Feb 2018 10:48 GMT

Walmart's e-commerce growth wanes, sending shares tumbling

Walmart's fourth-quarter earnings miss expectations, though revenue and same-store sales surpass projections.

CNBC  Tue, 20 Feb 2018 10:36 GMT

Newell earnings edge past estimates, helped by fragrances and containers

Newell Brands reported better-than-expected results and forecast current-quarter sales and profit ahead of estimates.

CNBC  Fri, 16 Feb 2018 15:37 GMT

Campbell Soup organic sales fall as dispute with Walmart continues

Campbell Soup reported a 2 percent drop in organic net sales in its second quarter as a key customer in North America placed fewer orders for its canned soups.

CNBC  Fri, 16 Feb 2018 15:02 GMT

Supply constraints to weigh on Kraft Heinz first-quarter results

Kraft Heinz's revenue missed analysts' expectations on weakening demand from retailers in the United States for processed foods such as peanuts and cheese.

CNBC  Fri, 16 Feb 2018 12:17 GMT

US tractor maker Deere upgrades 2018 outlook on improving equipment demand

U.S. tractor maker Deere said on Friday net sales and revenues rose 23 percent year-on-year to $6.91 billion in the quarter ending Jan. 28.

CNBC  Fri, 16 Feb 2018 12:12 GMT

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