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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
DPZ - Domino's Pizza Inc Today -
Before Open
5% 21.5% 1.74
UNP - Union Pacific Corp Today -
Before Open
3% 3.8% 1.94
TSM - Taiwan Semiconductor Manufacturing Company Ltd. Today -
Before Open
2% 0% 0.45
PM - Philip Morris International Inc Today -
Before Open
2% -19% 1.23
DHR - Danaher Corp Today -
Before Open
2% -3.5% 1.09
BK - Bank of New York Mellon Corp Today -
Before Open
2% 6.5% 1.03
BBT - BB&T Corp Today -
Before Open
2% 4.6% 1.01
BX - Blackstone Group LP Today -
Before Open
2% 14% 0.71
FITB - Fifth Third Bancorp Today -
Before Open
2% -5.3% 0.57

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 (%)
MTG - MGIC Investment Corp Wed 18 Jul Before Open (1 days ago) 36.11% 9.08% 9.1%
ABT - Abbott Laboratories Wed 18 Jul Before Open (1 days ago) 2.82% 3.11% 3.1%
MS - Morgan Stanley Wed 18 Jul Before Open (1 days ago) 20.37% 2.81% 2.8%
USB - U.S. Bancorp Wed 18 Jul Before Open (1 days ago) 0.99% -1.13% -1.1%
URI - United Rentals Inc Wed 18 Jul After Close (1 days ago) 10% 0% 0%
EBAY - eBay Inc Wed 18 Jul After Close (1 days ago) 0% 0% 0%
IBM - International Business Machines Corp Wed 18 Jul After Close (1 days ago) 1.65% 0% 0%
AXP - American Express Co Wed 18 Jul After Close (1 days ago) 0.55% 0% 0%
AA - Alcoa Corp. Wed 18 Jul After Close (1 days ago) 14.29% 0% 0%

Earnings News

Chipmaker Taiwan Semiconductor cuts revenue outlook again on cryptocurrency gloom

Taiwan Semiconductor trimmed its annual revenue and capital spending estimates.

CNBC  Thu, 19 Jul 2018 14:52 GMT

Danaher to spin off dental unit, posts earnings beat; shares rise

Danaher said it would spin off its dental unit into a publicly traded company, as the medical equipment maker seeks to revitalize a struggling business.

CNBC  Thu, 19 Jul 2018 14:15 GMT

Insurer Travelers misses profit estimates on storm losses

Travelers results were hurt by costly damage from wind and hail storms that pounded several U.S. regions in recent months.

CNBC  Thu, 19 Jul 2018 14:01 GMT

Blackstone posts 55 percent rise in second-quarter earnings

Blackstone, the largest manager of alternative assets such as private equity and real estate, said second-quarter earnings per share rose 55 percent from one year ago.

CNBC  Thu, 19 Jul 2018 11:29 GMT

EBay revenue misses as a weak US sporting season hits StubHub

The company's online ticket marketplace StubHub had a disappointing quarter, leading the e-commerce website to forecast underwhelming third-quarter results.

CNBC  Thu, 19 Jul 2018 10:47 GMT

Alcoa cuts its full-year forecast, citing tariffs; shares slide

Alcoa lowered its forecast for 2018, citing U.S. tariffs on imported aluminum and rising energy costs.

CNBC  Thu, 19 Jul 2018 10:26 GMT

Unilever’s profit dips amid Brazilian truck strike and currency fluctuations

Consumer goods maker Unilever reported lower-than-expected second quarter sales.

CNBC  Thu, 19 Jul 2018 06:13 GMT

American Express drops more than 3 percent after missing on revenue

The payments company said its net income rose 21 percent year over year amid growth in member spending and fees.

CNBC  Wed, 18 Jul 2018 20:12 GMT

IBM stock rises after earnings beat

IBM beat expectations on revenue and earnings for the second quarter, but gross margins were below estimates.

CNBC  Wed, 18 Jul 2018 19:30 GMT

At this pace, earnings growth will top the first quarter's record 26% increase

With 10 percent of S&P 500 companies reporting as of Wednesday morning, it looks like another above-trend quarter.

CNBC  Wed, 18 Jul 2018 16:32 GMT

Abbott Laboratories tops profit estimates and raises its full-year earnings forecast

Abbott Labs raised its full-year earnings forecast, powered by higher sales across its businesses, including its top-earning medical device unit.

CNBC  Wed, 18 Jul 2018 12:18 GMT

Morgan Stanley shares jump more than 3% after profit tops the Street on strong trading and investment banking

Morgan Stanley reported second-quarter earnings.

CNBC  Wed, 18 Jul 2018 10:38 GMT

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