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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.

Stock Earnings News | Investor Financial Market News

Campbell Soup reports quarterly earnings and revenue that beat analysts' expectations. The soup company is locked in a proxy fight with activist firm Third Point.

CNBC Tue, 20 Nov 2018 12:59 GMT

Kohl's reports quarterly earnings and revenue that topped analysts' expectations. While it also raised its profit forecast for the year, it was on the low end of what Wall Street had been calling for, and shares plunge.

CNBC Tue, 20 Nov 2018 12:37 GMT

Medical device maker Medtronic reported a 6 percent rise in quarterly revenue on Tuesday, helped by higher sales in its cardiac and vascular business.

CNBC Tue, 20 Nov 2018 12:03 GMT

Lowe's reports quarterly earnings and revenue that beat expectations, though same-store sales were softer than anticipated and the company lowers its full-year estimates.

CNBC Tue, 20 Nov 2018 11:03 GMT

Target's investments in its supply chain weighed on profits, but the retailer says it's now "better positioned for this holiday season than ever before."

CNBC Tue, 20 Nov 2018 10:58 GMT

The company, known for its brands Victoria's Secret and Bath & Body Works, beat profit expectations.

CNBC Mon, 19 Nov 2018 22:20 GMT

Chinese e-commerce firm JD.com's shares came under further pressure on Monday after the company reported its slowest quarterly revenue growth since its initial public offering in 2014.

CNBC Mon, 19 Nov 2018 13:20 GMT

J.C. Penney in October filled its vacant CEO role with Jill Soltau, former CEO of Joann Stores. Soltau came after a string of executive departures, including former J.C. Penney CEO Marvin Ellison and CFO Jeffrey Davis.

CNBC Thu, 15 Nov 2018 13:06 GMT

Walmart has been making investments in its stores, online and internationally to keep pace with arguably its biggest rival of all, Amazon.

CNBC Thu, 15 Nov 2018 10:58 GMT

Cisco beat expectations for the fiscal first quarter and met expectations for the next quarter.

CNBC Wed, 14 Nov 2018 21:16 GMT

Uber's losses have ticked up and growth has slowed from last quarter, according to the company's self-reported financials.

CNBC Wed, 14 Nov 2018 21:00 GMT

Macy's has been testing new technology and other concepts like mini marketplaces in stores to lure shoppers and grow sales.

CNBC Wed, 14 Nov 2018 12:30 GMT

Maersk said the effect of trade tensions could reduce global container trade between 0.5 and 2 percent during 2019 and 2020.

CNBC Wed, 14 Nov 2018 08:17 GMT

Blue Apron will reduce its workforce by 4 percent as the company aims to become profitable in 2019, the meal kit company announced Tuesday.

CNBC Tue, 13 Nov 2018 21:55 GMT

Marijuana producer Tilray reported quarterly earnings that beat analysts' expectations on Tuesday, though total revenues fell just shy of estimates.

CNBC Tue, 13 Nov 2018 21:25 GMT

Tuesday marks the company's first earnings report since debuting on the Nasdaq in October.

CNBC Tue, 13 Nov 2018 21:10 GMT

Susquehanna's Christopher Rolland upgraded Nvidia to positive from neutral even though he said the 'odds of a guidance miss are high' when the chipmaker reports earnings Thursday after the bell.

CNBC Tue, 13 Nov 2018 12:44 GMT

Bayer's adjusted core earnings were flat for the quarter, as better prescription numbers for cardiovascular drug Xarelto were tempered by a weaker animal health business and a strong euro weighing on the value of overseas sales.

CNBC Tue, 13 Nov 2018 11:28 GMT

Home Depot reports quarterly earnings that beat analysts' expectations and raises its sales outlook for the full year.

CNBC Tue, 13 Nov 2018 10:28 GMT

Though analysts are impressed with Disney's studio revenue, which grew 50 percent from the prior year, many focus on its new over-the-top strategy known as Disney+.

CNBC Fri, 09 Nov 2018 13:38 GMT

Activision Blizzard shares fell 10 percent during after-hours trading Thursday as the video game company missed estimates on fourth-quarter revenue projections but beat third quarter earnings-per-share predictions.

CNBC Thu, 08 Nov 2018 22:36 GMT

Dropbox stock rose more than 9 percent after the company beat estimates on third-quarter revenue and profit.

CNBC Thu, 08 Nov 2018 21:15 GMT

Shares of Yelp tanked more than 28 percent Thursday after the company announced its third quarter earnings report.

CNBC Thu, 08 Nov 2018 21:12 GMT

Disney's earnings come as investors continue to seek more information on the company's long-term vision for its various streaming investments as well as how it plans to integrate assets recently acquired from Twenty-First Century Fox.

CNBC Thu, 08 Nov 2018 20:32 GMT

D.R. Horton, the largest U.S. homebuilder, said on Thursday rising home prices and higher mortgage rates were weighing on demand, particularly for expensive homes.

CNBC Thu, 08 Nov 2018 14:21 GMT

While Roku beat on the top and bottom lines, the company missed analyst expectations on platform revenue, which encompasses increasingly important advertising revenue.

CNBC Thu, 08 Nov 2018 14:03 GMT

CEO Matthew Maddox says earnings since China's seven-day Golden Week holiday have been "choppy" during weekdays and "sporadic" on the weekends.

CNBC Thu, 08 Nov 2018 12:48 GMT

Qualcomm beat analysts' expectations for fourth-quarter revenue and profit on Wednesday.

CNBC Thu, 08 Nov 2018 10:38 GMT

Strong demand for AstraZeneca's new drugs - especially those for cancer - drove a return to sales growth in the third quarter and the drugmaker said it now expected a period of sustained growth "for years to come".

CNBC Thu, 08 Nov 2018 07:26 GMT

Revenue from the company's hardware segment topped Wall Street estimates, but revenue for the platform segment fell short.

CNBC Wed, 07 Nov 2018 21:07 GMT

The Trump administration on Tuesday said that China has failed to alter its "unfair" practices at the heart of the U.S.-China trade conflict, adding to tensions ahead of a high-stakes meeting later this month between U.S. President Donald Trump and Chinese President Xi Jinping.

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Reuters Tue, 20 Nov 2018 22:28:37 -0500

Asian stocks slid on Wednesday as intensifying concerns about global economic growth gripped financial markets, sending Wall Street shares and crude oil prices tumbling and driving the safe haven dollar up from a two-week low.

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Reuters Tue, 20 Nov 2018 22:02:21 -0500

Tencent Music Entertainment (TME) – China’s answer to Spotify – is facing crunch time on its hotly anticipated U.S. $2 billion mega IPO this year.

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Reuters Tue, 20 Nov 2018 21:54:51 -0500

Singapore authorities are investigating Noble Group Ltd for suspected false and misleading statements, just days before the Singapore-listed company was to complete its $3.5 billion debt restructuring deal to prevent its collapse.

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Reuters Tue, 20 Nov 2018 21:53:09 -0500

Oil prices on Wednesday clawed back some of the previous day's more than 6 percent plunge, lifted by a report of an unexpected decline in U.S. commercial crude inventories as well as record Indian crude imports.

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Reuters Tue, 20 Nov 2018 21:52:37 -0500

Japanese prosecutors are considering bringing a case against Nissan Motor Co after Chairman Carlos Ghosn's arrest on suspicion of financial misconduct, the Asahi Shimbun daily said on Wednesday.

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Reuters Tue, 20 Nov 2018 21:38:17 -0500

Japan believes it is important for Nissan Motor Co , Renault and Mitsubishi Motors Corp to maintain a stable alliance, its top government spokesman said on Wednesday.

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Reuters Tue, 20 Nov 2018 21:37:14 -0500

French carmaker Renault tapped its chief operating officer and a senior board member to fill in for embattled boss Carlos Ghosn, after an investigation by alliance partner Nissan led to his arrest on suspicion of financial misconduct.

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Reuters Tue, 20 Nov 2018 20:49:30 -0500

U.S. space agency NASA said on Tuesday it would review the workplace safety culture at SpaceX and Boeing Co, as the two companies gear up to fly astronauts to the International Space Station.

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Reuters Tue, 20 Nov 2018 20:45:47 -0500

Investors who bought insurance meant to mitigate losses from Sears Holdings Corp's bankruptcy proceedings are claiming that a hedge fund that sold the insurance is improperly influencing market proceedings, according to a letter seen by Reuters.

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Reuters Tue, 20 Nov 2018 20:24:09 -0500

Oil prices tumbled more than 6 percent on Tuesday in heavy trading volume, with U.S. crude diving to its lowest level in more than a year, caught in a broader Wall Street selloff fed by mounting concerns about a slowdown in global economic growth.

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Reuters Tue, 20 Nov 2018 19:25:21 -0500

Bitcoin slumped on Tuesday to its lowest this year, tumbling as much as 10 percent to breach $4,300 and taking losses in the world's best-known digital coin to 25 percent within a week.

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Reuters Tue, 20 Nov 2018 19:20:06 -0500

U.S. stocks sold off for a second day on Tuesday as energy shares dropped with oil prices, and retailers including Target and Kohl's sank after weak earnings and forecasts, fueling worries about economic growth.

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Reuters Tue, 20 Nov 2018 17:32:42 -0500

Canada's Bombardier Inc is the front-runner to win a New Jersey Transit (NJT) rail car contract, two sources familiar with the matter said, in a boost for the plane-and-train-maker's North American business which has wrestled with delivery delays and has lost orders to rivals.

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Reuters Tue, 20 Nov 2018 17:15:14 -0500

Jeffrey Gundlach, who runs DoubleLine Capital, said on Tuesday that investors should focus on capital preservation and avoid corporate bonds and Treasuries as inflationary pressures intensify.

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Reuters Tue, 20 Nov 2018 16:42:46 -0500

World equity markets and oil prices tumbled on Tuesday as investors grew more worried about economic growth prospects, while the U.S. dollar rose on flight to safe-haven currencies.

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Reuters Tue, 20 Nov 2018 16:38:51 -0500

A U.S. judge overseeing the federal litigation against Bayer AG's Monsanto unit over glyphosate-based weed-killers allegedly causing cancer on Tuesday selected the first case to be tried in federal court in February 2019.

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Reuters Tue, 20 Nov 2018 16:36:30 -0500

The U.S. Environmental Protection Agency granted oil major Chevron Corp a 2017 hardship waiver from U.S. biofuel laws for its Utah refinery earlier this year, according to a source familiar with the company's operations.

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Reuters Tue, 20 Nov 2018 16:10:01 -0500

U.S. stocks extended their selloff on Tuesday, with the S&P 500 hitting a three-week low, as energy shares dropped with oil prices and retailers including Target and Kohl's sank after weak earnings and forecasts.

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Reuters Tue, 20 Nov 2018 16:08:27 -0500

CVS Health Corp said on Tuesday that it expects to close its $69 billion purchase of health insurer Aetna Inc after Thursday's Thanksgiving holiday as two states continue to review the transaction.

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Reuters Tue, 20 Nov 2018 16:06:48 -0500

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