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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.

Upcoming Notable Earnings

Symbol/Company Earnings Date Predicted Move Since Last Earnings Est EPS
CIEN - Ciena Corp Today -
Before Open
10% 35.3% 0.44
NAV - Navistar International Corp Today -
Before Open
6% -30% -0.72
FLR - Fluor Corporation Today -
Before Open
5% 0% 0.27
RH - RH Today -
After Close
12% 116.3% 0.46
AVGO - Broadcom Ltd Today -
After Close
5% 41.5% 4.09
GPS - Gap Inc Today -
After Close
4% 18.7% -0.65
SFIX - Stitch Fix Inc Mon 8 Jun -
After Close (4 Days)
18% 0% -0.17
SIG - Signet Jewelers Ltd Tue 9 Jun -
Before Open (5 Days)
8% 94.7% -2.29
FIVE - Five Below Inc Tue 9 Jun -
After Close (5 Days)
6% 101.3% -0.30

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 (%)
AEO - American Eagle Outfitters Inc Wed 3 Jun Before Open (1 days ago) -250% 14.67% 14.7%
CPB - Campbell Soup Co Wed 3 Jun Before Open (1 days ago) 9.21% -6.13% -6.1%
DKS - Dick's Sporting Goods Inc Tue 2 Jun Before Open (2 days ago) -142% 3.68% 0.8%
ATHM - Autohome Inc Mon 1 Jun Before Open (3 days ago) 0% 0.27% 8.8%
BURL - Burlington Stores Inc Thu 28 May Before Open (7 days ago) -199.37% 1.47% 3.2%
DLTR - Dollar Tree Inc Thu 28 May Before Open (7 days ago) 22.35% 11.55% 8%
DG - Dollar General Corp Thu 28 May Before Open (7 days ago) 50.59% -1.65% 1.4%
DXC - DXC Technology Co Thu 28 May After Close (7 days ago) 23.71% -14.24% 7.7%
PSTG - Pure Storage Inc Thu 28 May After Close (7 days ago) 38.46% 4.95% 2.9%

Earnings News

Campbell Soup raises 2020 forecasts on strong sales in pandemic

The maker of Prego pasta sauce and Goldfish crackers now expects fiscal 2020 adjusted earnings per share of $2.87 to $2.92, up from its prior range of $2.55 to $2.60.

CNBC  Wed, 03 Jun 2020 13:33 GMT

American Eagle posts bigger-than-expected loss on virus-led store closures

The company said its net loss stood at $257.2 million, or $1.54 per share, in the quarter ended May 2, compared with a profit of $40.8 million, or 23 cents per share, a year earlier, mainly due to an impairment charge of about $156 million.

CNBC  Wed, 03 Jun 2020 13:30 GMT

Zoom revenue grew 169% during the quarter, and the company doubled its revenue guidance for the year

Zoom has been a darling of the work-from-home culture brought on by coronavirus, and the company's revenue growth accelerated, while its gross margin narrowed.

CNBC  Tue, 02 Jun 2020 20:10 GMT

Dick's Sporting Goods' same-store sales fall almost 30% during coronavirus pandemic

Dick's Sporting Goods reported a decline in first-quarter same-store sales of almost 30% because of store closings during the coronavirus crisis.

CNBC  Tue, 02 Jun 2020 12:42 GMT

Popeyes U.S. same-store sales soar more than 40%

Restaurant Brands International said Thursday that Popeyes' U.S. same-store sales have soared more than 40% as of the third full week of May.

CNBC  Thu, 28 May 2020 14:11 GMT

Abercrombie & Fitch sales fall 34%, with stores forced shut due to the pandemic; shares fall

Abercrombie & Fitch said its sales tanked 34% during the first quarter as its stores were forced shut during the coronavirus pandemic.

CNBC  Thu, 28 May 2020 11:55 GMT

Luxury homebuilder Toll Brothers scraps 2020 forecast on Covid-19 woes

U.S. luxury homebuilder Toll Brothers on Wednesday withdrew its full-year forecast and warned it would not provide such guidance for the foreseeable future due to uncertainty caused by the Covid-19 pandemic.

CNBC  Thu, 28 May 2020 10:54 GMT

Box forecasts full-year revenue above estimates on remote-work boost

Box forecast annual revenue above analysts' estimates and beat targets for quarterly sales on Wednesday, as demand rises for its online collaboration tools due to the global shift to work from home caused by the Covid-19 pandemic.

CNBC  Thu, 28 May 2020 10:44 GMT

Papa John's sales soared 33.5% in May — a record for 'second straight month,' CEO says

"In May, for the second straight month, Papa John's team members and franchisees delivered the best sales period in the company's history," CEO Rob Lynch said Wednesday.

CNBC  Wed, 27 May 2020 11:08 GMT

Domino's U.S. same-store sales rose 14% in first two months of the quarter

Domino's Pizza said Tuesday that its U.S. same-store sales climbed 14% during the first two months of its second quarter.

CNBC  Tue, 26 May 2020 21:30 GMT

Nvidia reports revenue up 39% from last year

The stock is up over 50% on the year, not including Thursday's after-hours move.

CNBC  Thu, 21 May 2020 20:31 GMT

Best Buy's earnings fall in first quarter, after initial sales surge during pandemic

The retailer had a surge of sales early during the pandemic, but later furloughed about 51,000 employees and took other cost-cutting measures.

CNBC  Thu, 21 May 2020 11:16 GMT

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