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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
BSX - Boston Scientific Corp Today -
Before Open
4% -4.9% 0.36
SWK - Stanley Black & Decker Inc Today -
Before Open
4% 7.7% 1.10
BA - Boeing Co Today -
Before Open
3% 2.5% 3.11
CAT - Caterpillar Inc Today -
Before Open
3% 3.8% 2.84
BIIB - Biogen Inc Today -
Before Open
3% -30.2% 6.88
ANTM - Anthem Inc Today -
Before Open
3% -8.1% 5.86
NSC - Norfolk Southern Corp Today -
Before Open
3% 21.5% 2.17
T - AT&T Inc Today -
Before Open
2% 4.6% 0.85
GD - General Dynamics Corp Today -
Before Open
2% 3.6% 2.38

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 (%)
TWTR - Twitter Inc Tue 23 Apr Before Open (1 days ago) 150% 15.64% 15.6%
MTG - MGIC Investment Corp Tue 23 Apr Before Open (1 days ago) 10.53% 1.67% 1.7%
EDU - New Oriental Education & Technology Group Inc Tue 23 Apr Before Open (1 days ago) 0% 2.82% 2.8%
HAS - Hasbro Inc Tue 23 Apr Before Open (1 days ago) 362.5% 14.23% 14.2%
TRU - TransUnion Tue 23 Apr Before Open (1 days ago) 7.55% -2.77% -2.8%
HOG - Harley-Davidson Inc Tue 23 Apr Before Open (1 days ago) 13.95% -2.01% -2%
PII - Polaris Industries Inc. Tue 23 Apr Before Open (1 days ago) 17.39% -1.23% -1.2%
ATI - Allegheny Technologies Inc Tue 23 Apr Before Open (1 days ago) 0% -2% -2%
TECK - Teck Resources Ltd Tue 23 Apr Before Open (1 days ago) 1.37% -0.2% -0.2%

Earnings News

Anthem beats earnings estimates, raises 2019 profit forecast

Anthem's first-quarter profit beat Wall Street estimates on Wednesday as it reined in expenses, and the U.S. health insurer raised its earnings forecast for the year.

CNBC  Wed, 24 Apr 2019 12:29 GMT

Facebook investors brace for an update from Zuckerberg on the company's planned pivot to privacy

With Facebook set to release quarterly results Wednesday afternoon, Wall Street wants to know how well the company is preparing to make money beyond ads.

CNBC  Wed, 24 Apr 2019 12:00 GMT

Domino's shares jump after earnings beat, shrugging off slowing sales

Domino's Pizza reports quarterly earnings topped analysts' expectations but sales fell short.

CNBC  Wed, 24 Apr 2019 11:40 GMT

Tesla earnings in the spotlight as investors look for clues about demand, Model 3 margins

Tesla investors await updates on service improvements, the Shanghai Gigafactory and Model 3 margins.

CNBC  Wed, 24 Apr 2019 11:30 GMT

Caterpillar slips 2% after CFO says company may lose market share in China

Caterpillar said it now expects full year profit per share between $12.06 and $13.06, citing a tax benefit of 31 cents per share.

CNBC  Wed, 24 Apr 2019 11:12 GMT

Market watcher who predicted the December plunge sees tide of gains from earnings beats

Ned Davis Research's Ed Clissold sees the market grinding higher as more earnings reports beat analyst estimates.

CNBC  Wed, 24 Apr 2019 11:09 GMT

Boeing pulls 2019 guidance, pauses share buybacks due to 737 Max uncertainty

Boeing will pause share buybacks and is withdrawing its 2019 financial forecast while it works through issues surrounding the 737 Max.

CNBC  Wed, 24 Apr 2019 11:09 GMT

AT&T misses quarterly revenue estimates

AT&T posted a surprise gain in first quarter net wireless subscribers who pay a monthly bill.

CNBC  Wed, 24 Apr 2019 11:06 GMT

EBay reported earnings that topped analysts' expectations

EBay reported first-quarter earnings of $518 million.

CNBC  Wed, 24 Apr 2019 09:52 GMT

Snap rally fades after earnings beat

Snap shares soared in after-hours trading on Tuesday after the company lowered losses, beat on revenue and continued growing its user base.

CNBC  Tue, 23 Apr 2019 19:34 GMT

Lockheed Martin jumps 5% after earnings top expectations and it raises 2019 forecast

Lockheed Martin first-quarter earnings are far above what Wall Street anticipated.

CNBC  Tue, 23 Apr 2019 11:34 GMT

Trump vows to 'reciprocate' against EU tariffs after Harley reports nearly 27% drop in profit

Trump, who previously called for a boycott against motorcycle company, said the EU tariffs have forced Harley to move jobs overseas.

CNBC  Tue, 23 Apr 2019 11:21 GMT

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