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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
HOG - Harley-Davidson Inc Today -
Before Open
5% -6% 0.22
PHM - PulteGroup, Inc. Today -
Before Open
3% 16% 1.08
PFE - Pfizer Inc. Today -
Before Open
2% 7.7% 0.57
MMM - 3M Co Today -
Before Open
2% 4.1% 2.10
HCA - HCA Healthcare, Inc. Today -
Before Open
2% 11.6% 3.06
UTX - United Technologies Corp Today -
Before Open
1% 9.2% 1.84
LMT - Lockheed Martin Corp Today -
Before Open
1% 15.6% 4.99
NUE - Nucor Corp Today -
Before Open
1% -5% 0.34
AMD - Advanced Micro Devices Inc Today -
After Close
9% 49.1% 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 (%)
S - Sprint Corp Mon 27 Jan Before Open (1 days ago) 40% -4.14% -4.1%
ARNC - Arconic Inc Mon 27 Jan Before Open (1 days ago) -1.85% 5.36% 5.4%
DHI - D.R. Horton, Inc. Mon 27 Jan Before Open (1 days ago) 7.61% 1.98% 2%
WHR - Whirlpool Corp Mon 27 Jan After Close (1 days ago) 14.19% 0% 0%
FFIV - F5 Networks, Inc. Mon 27 Jan After Close (1 days ago) 6.01% 0% 0%
JNPR - Juniper Networks, Inc. Mon 27 Jan After Close (1 days ago) 0% 0% 0%
SYF - Synchrony Financial Fri 24 Jan Before Open (4 days ago) 1.85% -9.86% -11%
AXP - American Express Co Fri 24 Jan Before Open (4 days ago) 1.5% 2.85% -0.6%
STM - STMicroelectronics N.V. Thu 23 Jan Before Open (5 days ago) 16.22% 5.81% 1.5%

Earnings News

Apple is set to report earnings after the bell

It's Apple's biggest quarter of the year and includes important holiday sales.

CNBC  Tue, 28 Jan 2020 20:45 GMT

Starbucks earnings: 79 cents per share, vs 76 cents EPS expected

Starbucks has closed all cafes and halted delivery for locations in the Hubei province in response to the Wuhan coronavirus outbreak.

CNBC  Tue, 28 Jan 2020 20:31 GMT

Caterpillar and two other industrial stocks are best in show this earnings season

Nearly half of the industrials sector is reporting this week. These are the names to watch, according to Oppenheimer's Ari Wald and Joule Financial's Quint Tatro.

CNBC  Tue, 28 Jan 2020 16:25 GMT

Here's what every major Wall Street analyst predicts for Apple earnings after the bell

Apple reports its first quarter results on Tuesday after the bell.

CNBC  Tue, 28 Jan 2020 16:21 GMT

Facebook users keep clicking on ads, pointing to strong fourth quarter results

Facebook users are clicking on more and more ads according to the company's own tools that are provided to advertisers.

CNBC  Tue, 28 Jan 2020 15:45 GMT

Lockheed Martin beats estimates, raises sales forecast on higher F-35 deliveries

Lockheed Martin Corp, the Pentagon's best weapon's supplier, reported a better-than-expected quarterly profit on Tuesday, raising its 2020 revenue outlook to $62.75 billion to $64.25 billion, surpassing analysts' expectations.

CNBC  Tue, 28 Jan 2020 15:09 GMT

United Tech says Collins 2020 profit to be hurt mainly due to Boeing's 737 Max grounding

United Technologies CFO Neil Mitchill believes that operating profits for the Collins Aerospace unit will take a hit of about $550 million to $600 million, citing the grounding of Boeing's 737 Max aircraft.

CNBC  Tue, 28 Jan 2020 14:38 GMT

Harley-Davidson's shares tumble on steeper fall in revenues

Harley-Davidson on Tuesday reported a larger-than-expected decline in its motorcycles revenue hurt by a continuing slide in retail sales in the United States, sending its shares plunging in premarket trade.

CNBC  Tue, 28 Jan 2020 13:25 GMT

Pfizer profit misses as breast cancer drug sales fall short of estimates

Pfizer on Tuesday reported lower-than-expected quarterly profit and a decline in revenue as sales of its off-patent pain treatment Lyrica more than halved, sending its shares down more than 3%.

CNBC  Tue, 28 Jan 2020 11:55 GMT

3M forecasts 2020 profit below estimates on weak China demand; cuts 1,500 jobs

U.S. industrial giant 3M reported a 28% fall in quarterly profit on Tuesday due to restructuring and litigation charges and said it would cut 1,500 jobs globally as it looks to reduce costs.

CNBC  Tue, 28 Jan 2020 11:48 GMT

China and Apple's TV service will be under the spotlight when the tech giant reports earnings

It will be the first full quarter with iPhone 11 sales, so investors will be looking for signs of how well the new iPhones are selling.

CNBC  Mon, 27 Jan 2020 22:46 GMT

American Express earnings beat expectations on strong card fee revenues, shares rise

American Express said its stronger-than-forecast profit was driven in large part by a "well-balanced mix" in fee, spending and lending revenues.

CNBC  Fri, 24 Jan 2020 12:36 GMT

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