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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
GOOS - Canada Goose Holdings Inc. Today -
Before Open
13% 14.9% -0.30
HUYA - HUYA Inc. Sponsored ADR Today -
Before Open
6% 0% 0.08
SYY - Sysco Corp Today -
Before Open
3% 11.6% -0.39
VIPS - Vipshop Holdings Ltd Tomorrow -
Before Open
10% 38.5% 0.24
XNET - Xunlei Ltd Tomorrow -
Before Open
7% 13.2%
WLL - Whiting Petroleum Corporation Tomorrow -
Before Open
6% -7.5% -1.45
M - Macy's Inc Tomorrow -
Before Open
5% 0% -1.94
FOSL - Fossil Group, Inc. Tomorrow -
After Close
12% 15.7%
CSCO - Cisco Systems Inc Tomorrow -
After Close
5% 13.8% 0.67

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 (%)
MELI - MercadoLibre, Inc. Mon 10 Aug Before Open (1 days ago) 1010% -5.83% -5.8%
ICPT - Intercept Pharmaceuticals, Inc. Mon 10 Aug Before Open (1 days ago) 34.69% 8.37% 8.4%
RCL - Royal Caribbean Cruises Ltd. Mon 10 Aug Before Open (1 days ago) -30.15% 10% 10%
FOLD - Amicus Therapeutics Inc Mon 10 Aug Before Open (1 days ago) 23.08% -1.17% -1.2%
SPN - Superior Energy Services Inc Mon 10 Aug Before Open (1 days ago) 0% -4.35% -4.3%
MAR - Marriott International Mon 10 Aug Before Open (1 days ago) -45.45% 3.57% 3.6%
DUK - Duke Energy Corporation Mon 10 Aug Before Open (1 days ago) 3.85% -2.14% -2.1%
PPL - PPL Corporation Mon 10 Aug Before Open (1 days ago) -1.79% 5.56% 5.6%
HTZ - Hertz Global Holdings, Inc Mon 10 Aug After Close (1 days ago) -50.64% 0% 0%

Earnings News

Marriott posts bigger-than-expected loss as virus hits bookings

Total revenue plunged 72.4% to $1.46 billion.

CNBC  Mon, 10 Aug 2020 11:14 GMT

Goldman Sachs cuts quarterly earnings, citing legal provisions relating to the 1MDB scandal

Goldman Sachs on Friday lowered its previously stated quarterly net earnings applicable to common shareholders to $197 million from $2.25 billion.

CNBC  Fri, 07 Aug 2020 11:19 GMT

Uber ride-sharing revenue plummets, food delivery more than doubles

Uber narrowed losses, and saw a spike in demand for its food delivery service during the second quarter. However, bookings for Uber's ride-sharing business were down 73% from last year.

CNBC  Thu, 06 Aug 2020 19:37 GMT

Popeyes parent's revenue falls 25% despite chicken chain's soaring same-store sales

Popeyes, powered by its popular chicken sandwich, reported same-store sales growth of 24.8%.

CNBC  Thu, 06 Aug 2020 10:48 GMT

Toyota ekes out weakest first quarter profit in nine years as pandemic slams car sales

Toyota Motor eked out its smallest quarterly profit in nine years as the coronavirus pandemic halved its car sales and nearly wiped out its bottom line.

CNBC  Thu, 06 Aug 2020 09:51 GMT

Moderna's second-quarter revenue jumps fivefold on coronavirus vaccine development

Moderna said it has begun talks with multiple countries to supply its potential coronavirus vaccine, called mRNA-1273, and has already received about $400 million in deposits as of July 31.

CNBC  Wed, 05 Aug 2020 11:13 GMT

CVS Health raises forecast for year as it adapts to changing health-care habits

The company filled fewer prescriptions during the quarter because of stay-at-home orders, but its health benefits business got a boost as people delayed elective procedures.

CNBC  Wed, 05 Aug 2020 10:48 GMT

Disney shares pop on reaching 100 million streaming subscribers and plans for new streaming service

Disney took a $3.5 billion hit to its operating income from parks being closed during the quarter.

CNBC  Tue, 04 Aug 2020 19:32 GMT

Take-Two raises sales forecast as videogames get stay-at-home boost

Take-Two Interactive Software raised its fiscal year adjusted sales forecast after beating quarterly estimates on demand for its videogame franchises "Grand Theft Auto" and "NBA 2K" from people stuck at home due to lockdowns.

CNBC  Tue, 04 Aug 2020 09:47 GMT

AIG quarterly profit tumbles on catastrophe losses, private-equity losses

Insurer AIG posted a 56% fall in quarterly adjusted earnings, spurred partly by higher catastrophe losses and lower private-equity returns.

CNBC  Tue, 04 Aug 2020 09:38 GMT

Clorox posted its highest sales growth in 'modern history' last fiscal year, CEO says

Clorox is seeing "broad-based strength" in the midst of the coronavirus pandemic, CEO Benno Dorer told CNBC.

CNBC  Mon, 03 Aug 2020 22:41 GMT

Clorox names longtime executive its new CEO, as company beats estimates on pandemic-led demand

Clorox beat market estimates for quarterly net sales on Monday, as U.S. households spent more on disinfectant and other cleaning products due to the Covid-19 pandemic.

CNBC  Mon, 03 Aug 2020 10:58 GMT

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