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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
SRPT - Sarepta Therapeutics, Inc. Today -
Before Open
7% -39.1% -1.34
CLF - Cleveland-Cliffs Inc Today -
Before Open
7% -35.7% 0.25
ALXN - Alexion Pharmaceuticals Inc Today -
Before Open
4% -17.7% 2.27
FCX - Freeport-McMoRan Inc. Today -
Before Open
4% -15.7% -0.01
GWW - W W Grainger Inc Today -
Before Open
4% 13.6% 4.44
BA - Boeing Co Today -
Before Open
3% -11.3% 2.04
CAT - Caterpillar Inc Today -
Before Open
3% -4.3% 2.83
ANTM - Anthem Inc Today -
Before Open
3% -16.4% 4.84
BSX - Boston Scientific Corp Today -
Before Open
3% -9.9% 0.38

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 (%)
HAL - Halliburton Co Mon 21 Oct Before Open (2 days ago) 0% 6.4% 6.4%
HLX - Helix Energy Solutions Group Inc Mon 21 Oct After Close (2 days ago) 16.67% 0% 0%
CDNS - Cadence Design Systems Inc Mon 21 Oct After Close (2 days ago) 9.09% 0% 0%
ZION - Zions Bancorp Mon 21 Oct After Close (2 days ago) 8.33% 0% 0%
AMTD - TD Ameritrade Holding Corp Mon 21 Oct After Close (2 days ago) 8.25% 0% 0%
SYF - Synchrony Financial Fri 18 Oct Before Open (5 days ago) 8.93% 0.91% 3.2%
KO - Coca-Cola Co Fri 18 Oct Before Open (5 days ago) 0% 1.84% 0.8%
SLB - Schlumberger NV Fri 18 Oct Before Open (5 days ago) 7.5% 1.32% 5.3%
AXP - American Express Co Fri 18 Oct Before Open (5 days ago) 0.48% -1.96% 0%

Earnings News

Tesla's Q3 earnings report comes as major questions loom over China plans, SUV production

Tesla reports earnings after the bell on Wednesday, and Wall Street wants answers on Autopilot revenue, and just when Model Y deliveries and China vehicle production will begin.

CNBC  Wed, 23 Oct 2019 12:26 GMT

Blackstone third-quarter earnings drop less than expected

Blackstone said its distributable earnings in the third quarter fell 8% year-on-year, surpassing most analyst estimates.

CNBC  Wed, 23 Oct 2019 11:53 GMT

Boeing shares rise despite big earnings miss

In the earnings report, the aerospace giant says it expects regulatory approval of the 737 MAX return to service in the fourth quarter of 2019.

CNBC  Wed, 23 Oct 2019 10:58 GMT

Eli Lilly misses sales estimates as top-seller Trulicity disappoints

Eli Lilly reported a 9.1% increase in third-quarter profit on Wednesday, helped by higher sales of its top-selling diabetes drug, Trulicity, and lower tax expense.

CNBC  Wed, 23 Oct 2019 10:36 GMT

Caterpillar reports earnings that badly miss the Street, cuts forecast again

The heavy machinery manufacturer blamed the dismal results on a reduction in inventories from dealers.

CNBC  Wed, 23 Oct 2019 10:33 GMT

Trade tensions weigh on Texas Instruments revenue forecast

Texas Instruments Inc forecast current-quarter revenue well below estimates on Tuesday.

CNBC  Wed, 23 Oct 2019 08:41 GMT

Snap stock drops on weak guidance

Snap shares are up over 150% this year, reflecting a return of user and revenue growth.

CNBC  Tue, 22 Oct 2019 19:37 GMT

Chipotle crushes earnings estimates, set to accelerate drive-thru expansion plans

Chipotle is now forecasting that it could open fewer than 140 to 155 new stores in fiscal 2019.

CNBC  Tue, 22 Oct 2019 19:36 GMT

UPS shares fall, despite earnings beat, as COO retirement throws wrench in succession plans

United Parcel Service's strong earnings report Tuesday was overshadowed by news of the retirement of Chief Operating Officer Jim Barber, who was long viewed as the company's next CEO.

CNBC  Tue, 22 Oct 2019 12:31 GMT

Lockheed Martin profit up but forecasts lower cash flow in 2020; shares slip

Lockheed Martin raised its forecast for 2019 earnings as it reported a 9.2% rise in quarterly profit on Tuesday, helped by increased sales in its aeronautics business, which makes F-35 fighter jets.

CNBC  Tue, 22 Oct 2019 12:13 GMT

Harley-Davidson tops forecasts as international sales improve

Harley-Davidson reported better-than-expected quarterly profits on Tuesday and stuck to its full-year shipment forecast, allaying fears of another hit from European import tariffs and a further slump in sales in its main U.S. market.

CNBC  Tue, 22 Oct 2019 11:55 GMT

McDonald's pulls back on promotions and earnings fall short, shares down 4%

McDonald's promotions struggled to lure U.S. customers away from the competition.

CNBC  Tue, 22 Oct 2019 11:07 GMT

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