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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
CLR - Continental Resources Inc Tomorrow -
After Close
4% -6.8% 0.59
RIG - Transocean Ltd. Tomorrow -
After Close
3% -14.1% -0.24
HIMX - Himax Technologies, Inc. Tue 19 Feb -
Before Open (2 Days)
4% -27.9% 0.02
WMT - Walmart Inc Tue 19 Feb -
Before Open (2 Days)
3% -1.5% 1.33
SAGE - Sage Therapeutics, Inc. Tue 19 Feb -
Before Open (2 Days)
3% 27.6% -2.89
MDT - Medtronic PLC Tue 19 Feb -
Before Open (2 Days)
2% 2.1% 1.24
ECL - Ecolab Inc. Tue 19 Feb -
Before Open (2 Days)
2% 11.5% 1.54
GPC - Genuine Parts Co Tue 19 Feb -
Before Open (2 Days)
2% 13.1% 1.33
HLF - Herbalife LTD. Tue 19 Feb -
After Close (2 Days)
7% 3.8% 0.61

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 (%)
AXL - American Axle & Manufacturing Holdings Inc Fri 15 Feb Before Open (2 days ago) 4.65% 14.49% 14.5%
NWL - Newell Brands Inc Fri 15 Feb Before Open (2 days ago) 14.63% -20.89% -20.9%
YNDX - Yandex N.V. Fri 15 Feb Before Open (2 days ago) -6.25% -8.54% -8.5%
DE - Deere & Co Fri 15 Feb Before Open (2 days ago) -14.44% -2.11% -2.1%
PEP - PepsiCo Inc Fri 15 Feb Before Open (2 days ago) 0% 2.95% 2.9%
TRU - TransUnion Thu 14 Feb Before Open (3 days ago) 10.53% -1.27% -2.1%
EQT - EQT Corporation Thu 14 Feb Before Open (3 days ago) 0% -5.26% -1.5%
AZN - AstraZeneca PLC Thu 14 Feb Before Open (3 days ago) 116.44% 9.29% 11.9%
ZTS - Zoetis Inc. Thu 14 Feb Before Open (3 days ago) 2.6% 5.68% 8.1%

Earnings News

Under Armour earnings, sales top expectations. And the stock is swinging all over the place

Under Armour says U.S. sales fell 6 percent during the fourth quarter to $965 million, while international sales climbed 28 percent.

CNBC  Tue, 12 Feb 2019 12:00 GMT

Skechers surges 15% after 'a year of record sales' and strong guidance

Skechers stock rocketed higher after giving strong profit guidance for the quarter ahead while reporting better-than-expected fourth-quarter earnings Thursday evening.

CNBC  Fri, 08 Feb 2019 13:17 GMT

Hasbro's profit took harder-than-expected hit from Toys R Us store closures

Hasbro's fourth-quarter earnings missed estimates by a wide margin, but investors shrugged off the news, after the company outlined a promising slate of new toys for 2019.

CNBC  Fri, 08 Feb 2019 11:46 GMT

Expedia profit falls as it faces a legal fight with United Airlines

Expedia boosted fourth-quarter revenue by selling more hotel rooms and airline tickets, but write-downs pushed profit down 69 percent, to $17 million.

CNBC  Fri, 08 Feb 2019 10:46 GMT

Mattel shares soar after strong Barbie sales fuel surprise profit

Shares of Barbie owner Mattel skyrocketed as much as 20 percent on Thursday, after the company reported better-than-expected fourth-quarter earnings and revenue after the closing bell.

CNBC  Thu, 07 Feb 2019 21:10 GMT

As earnings recession fears grip Wall Street, three experts weigh in on what's next

Fears of an earnings recession are cropping up in the market as company profits are expected decline for the first time in two years. Three experts weigh in on whether or not the markets can outlast earnings woes

CNBC  Thu, 07 Feb 2019 20:39 GMT

Philip Morris International beats earnings, revenue expectations

Philip Morris International on Thursday reported quarterly earnings and revenue that beat analysts' expectations.

CNBC  Thu, 07 Feb 2019 14:31 GMT

Dunkin' shares drop after coffee chain focuses attention on espresso

Shares of Dunkin' Brands dropped 6 percent Thursday after the company reported flat same-store sales growth, saying it focused all of its attention during the quarter on rolling out espresso drinks in its stores.

CNBC  Thu, 07 Feb 2019 14:18 GMT

Coach owner Tapestry cuts forecast, and shares dive

Tapestry blamed falling tourist spending and a slowing global economy for a cut in its forecast for full-year adjusted profit on Thursday, as it reported disappointing holiday numbers and a fall in sales at Kate Spade handbags.

CNBC  Thu, 07 Feb 2019 12:34 GMT

Twitter crashes 10% after it says expenses will rise sharply

Twitter expects operating expenses to increase 20 percent in 2019. It will also change the way it reports monthly active users.

CNBC  Thu, 07 Feb 2019 11:34 GMT

Chipotle shares jump after company crushes earnings estimates, as turnaround pace picks up

Chipotle reported quarterly earnings and revenue that beat analysts' expectations, thanks to increasing foot traffic.

CNBC  Wed, 06 Feb 2019 20:32 GMT

Match Group falls more than 4% after analyst says Tinder growth to slow 'substantially'

After recommending Match Group for years, Deutsche Bank has finally decided to "swipe left" on the online dating platform.

CNBC  Wed, 06 Feb 2019 16:40 GMT

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