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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
HPQ - HP Inc Tue 29 May -
After Close (3 Days)
6% 2.4% 0.48
CRM - Salesforce.com Inc Tue 29 May -
After Close (3 Days)
5% 10.1% 0.18
KORS - Michael Kors Holdings Ltd Wed 30 May -
Before Open (4 Days)
9% 4.9% 0.60
DSW - DSW Inc Wed 30 May -
Before Open (4 Days)
7% 31.7% 0.36
CHS - Chico's FAS Inc Wed 30 May -
Before Open (4 Days)
6% 17.2% 0.26
DKS - Dick's Sporting Goods Inc Wed 30 May -
Before Open (4 Days)
5% -6.7% 0.42
ADI - Analog Devices Inc Wed 30 May -
Before Open (4 Days)
2% 3.5% 1.37
BOX - Box Inc Wed 30 May -
After Close (4 Days)
6% 13.9% -0.27
CIEN - Ciena Corp Thu 31 May -
Before Open (5 Days)
9% 6.8% 0.23

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 (%)
FL - Foot Locker Inc Fri 25 May Before Open (1 days ago) 16% 20.16% 20.2%
BBY - Best Buy Co Inc Thu 24 May Before Open (2 days ago) 9.33% -6.65% -9.9%
HRL - Hormel Foods Corp Thu 24 May Before Open (2 days ago) -2.22% -1.12% 0.1%
MDT - Medtronic PLC Thu 24 May Before Open (2 days ago) 2.9% 2.03% 1.2%
NTNX - Nutanix Inc Thu 24 May After Close (2 days ago) -4.55% -5.17% -5.2%
SPLK - Splunk Inc Thu 24 May After Close (2 days ago) -30.51% -5.2% -5.2%
VEEV - Veeva Systems Inc Thu 24 May After Close (2 days ago) 0% -0.17% -0.2%
ADSK - Autodesk Inc Thu 24 May After Close (2 days ago) -5.56% -4.44% -4.4%
DXC - Thu 24 May After Close (2 days ago) 4.11% -5.51% -5.5%

Earnings News

Foot Locker shares are jumping 16% after a blowout earnings report

Shares of shoe retailer Foot Locker surge after the company reports earnings well ahead of Wall Street expectations.

CNBC  Fri, 25 May 2018 11:53 GMT

A specialty retailer up 118% in one year could have more room to run after earnings

The options market is implying a relatively tame move for Lululemon on next week's earnings report after a mammoth run.

CNBC  Fri, 25 May 2018 11:16 GMT

Autodesk forecasts second-quarter profit below estimates

Autodesk forecast second-quarter profit on Thursday below Wall Street expectations, sending the AutoCAD software maker's shares down nearly 4 percent.

CNBC  Fri, 25 May 2018 10:09 GMT

Gap shares tumble on earnings miss as Old Navy growth slows

Earnings fell short of Street expectations.

CNBC  Thu, 24 May 2018 20:30 GMT

Victoria's Secret might be 'broken' as L Brands slashes its outlook

Analysts are concerned about unhealthy inventories at some stores and a huge footprint still in malls.

CNBC  Thu, 24 May 2018 12:10 GMT

Best Buy online growth slows, overshadowing strong earnings

Best Buy, the No. 1 U.S. consumer electronics retailer, reported a forecast-beating rise in same-store sales in the first quarter, helped by strong customer demand.

CNBC  Thu, 24 May 2018 11:49 GMT

Williams-Sonoma shares surge after big earnings beat and raised guidance

Williams-Sonoma stock is up more than 11 percent in after-hours trading following the report.

CNBC  Thu, 24 May 2018 11:30 GMT

Heart, diabetes devices boost Medtronic's quarterly profit

Medtronic reported a 25.5 percent rise in quarterly profit on Thursday on higher demand for its heart devices.

CNBC  Thu, 24 May 2018 11:04 GMT

Ralph Lauren tops estimates as margins improve

Ralph Lauren reported a higher-than-expected quarterly profit, as the luxury apparel maker's move to pull products off department store shelves and sell more products at full-price boosted margins.

CNBC  Wed, 23 May 2018 13:12 GMT

Nordstrom's post-earnings sell-off was 'overdone,' buy for its digital strategy, Deutsche Bank says

Nordstrom's recent earnings sell-off presents a compelling buying opportunity, according to Deutsche Bank.

CNBC  Wed, 23 May 2018 12:47 GMT

Tiffany's upbeat quarter, higher forecasts push stock to record high

Tiffany reported better-than-expected first quarter comparable store sales on Wednesday.

CNBC  Wed, 23 May 2018 10:54 GMT

Target shares sink as earnings fall short, sales hurt by spring weather

Target's sales of nonseasonal products like food and beverages helped buffer the impact of the weather.

CNBC  Wed, 23 May 2018 10:24 GMT

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