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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

Cheerios maker General Mills Inc's quarterly sales fell short of Wall Street estimates on Wednesday.

CNBC Wed, 18 Sep 2019 20:11 GMT

TransferWise posted an annual net profit of £10.3 million on revenues of £179 million.

CNBC Wed, 18 Sep 2019 04:00 GMT

The pet food and product retailer posted net sales of $1.15 billion, topping estimates of $1.13 billion, according to a survey of analysts by Refinitiv.

CNBC Tue, 17 Sep 2019 21:30 GMT

Adobe's quarterly guidance was light, but the stock still went up after its fiscal third quarter results beat expectations.

CNBC Tue, 17 Sep 2019 20:19 GMT

In August, FedEx announced it was ending its ground delivery contract with Amazon.

CNBC Tue, 17 Sep 2019 20:08 GMT

Oracle's Mark Hurd, who was hired by founder Larry Ellison in 2010, is taking a leave of absence, the company said on Wednesday.

CNBC Wed, 11 Sep 2019 20:12 GMT

Shares of GameStop tanked after the company reported second quarter earnings and sales that missed analysts' expectations.

CNBC Tue, 10 Sep 2019 21:04 GMT

The enterprise cloud company beat analyst expectations on revenue and provided strong guidance for the next quarter and full fiscal year.

CNBC Fri, 06 Sep 2019 14:51 GMT

Three of Wall Street's top-performing IPO stocks in 2019 tumbled after the companies' quarterly results failed to satisfy investors and justify their high valuations.

CNBC Fri, 06 Sep 2019 10:20 GMT

Lululemon in April said it plans to double its men's and online sales over the next five years, targeting annual revenue growth in the low teens during that time.

CNBC Thu, 05 Sep 2019 20:11 GMT

Lululemon has done some heavy lifting this year. Two traders discuss whether there are more highs ahead.

CNBC Thu, 05 Sep 2019 19:29 GMT

Slack's revenue got impacted in its first earnings report as a public company by service issues that caused the company to offer credits to customers.

CNBC Wed, 04 Sep 2019 19:30 GMT

JetBlue says a key revenue metric might contract in the third quarter, partially due to the impact of Hurricane Dorian.

CNBC Wed, 04 Sep 2019 12:03 GMT

Campbell Soup reports better-than-expected fourth-quarter profit, benefiting from cost cuts, sending shares climbing before the bell.

CNBC Fri, 30 Aug 2019 12:47 GMT

The apparel maker is grappling with the impact of increased U.S. tariffs on Chinese goods.

CNBC Thu, 29 Aug 2019 12:21 GMT

Investors were pessimistic even though Best Buy reported earnings that beat expectations by 9 cents and raised its guidance for the fiscal year.

CNBC Thu, 29 Aug 2019 12:20 GMT

The outlook as well as a quarterly profit beat eased some concerns around the impact of the Trump administration's latest tariffs on some Chinese imports, including holiday merchandise.

CNBC Thu, 29 Aug 2019 11:09 GMT

Quarterly revenue was hurt by sluggish demand in Coty's biggest segment, consumer beauty.

CNBC Wed, 28 Aug 2019 10:48 GMT

Tiffany's quarterly earnings top expectations, but sales fall short. The luxury jeweler also maintained its outlook for the full year.

CNBC Wed, 28 Aug 2019 10:45 GMT

Autodesk said that due to "trade tensions and macro uncertainty," it lowered its revenue outlook for the year.

CNBC Tue, 27 Aug 2019 20:39 GMT

HPE's revenue has now fallen on an annualized basis for three consecutive quarters, but the company raised its guidance forecast for the full fiscal year.

CNBC Tue, 27 Aug 2019 20:06 GMT

The sexy image that once boosted Victoria's Secret has been haunting L Brands more recently, as women are steering clear of the brand's hot pink, lacy and bejeweled lingerie.

CNBC Wed, 21 Aug 2019 21:00 GMT

Here's what Nordstrom reported for its fiscal second-quarter earnings.

CNBC Wed, 21 Aug 2019 20:14 GMT

Target CEO Brian Cornell says he's encouraged by Trump's decision to postpone some consumer-oriented tariffs that were supposed to start Sept. 1.

CNBC Wed, 21 Aug 2019 12:34 GMT

Toll Brothers reported a better-than-expected quarterly profit on higher home prices, but its shares fell as orders declined, hinting at weaker demand for new homes.

CNBC Wed, 21 Aug 2019 11:30 GMT

Drug distributor Cardinal Health warned that its business could be hurt as it defends itself against several opioid-related lawsuits.

CNBC Wed, 21 Aug 2019 11:03 GMT

Target beats second-quarter earnings expectations thanks to an increase in traffic and sales. The retailer also boosts its full-year estimates.

CNBC Wed, 21 Aug 2019 10:30 GMT

Lowe's also tops rival Home Depot on same-store sales growth in the U.S.

CNBC Wed, 21 Aug 2019 10:03 GMT

Kohl's says a strong start to the back-to-school season and new partnership with Amazon helped it beat earnings expectations.

CNBC Tue, 20 Aug 2019 11:04 GMT

Home Depot's CEO says the retailer cut its outlook partly due to "the potential impacts to the U.S. consumer arising from recently announced tariffs."

CNBC Tue, 20 Aug 2019 09:23 GMT

A deal to transfer Deutsche Bank's prime brokerage business to BNP Paribas could see up to 1,000 staff move from the German lender to the French bank, BNP said on Monday.

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Reuters Mon, 23 Sep 2019 05:15:28 -0400

The world's oldest travel firm Thomas Cook collapsed on Monday, stranding more than half a million holidaymakers around the globe and sparking the largest peacetime repatriation effort in British history.

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Reuters Mon, 23 Sep 2019 05:13:05 -0400

Thomas Cook , the world's oldest travel firm, collapsed on Monday, stranding hundreds of thousands of holidaymakers around the globe and sparking the largest peacetime repatriation effort in British history.

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Reuters Mon, 23 Sep 2019 05:13:05 -0400

More than half a million holidaymakers were stranded around the globe on Monday following the collapse of Thomas Cook , the world's oldest travel firm.

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Reuters Mon, 23 Sep 2019 05:12:14 -0400

Thomas Cook's German holiday airline Condor has asked the German government for a bridging loan, the airline said on Monday, adding it would continue operating despite its parent company's collapse.

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Reuters Mon, 23 Sep 2019 04:59:41 -0400

Global shares dipped on Monday as weaker than expected economic surveys added to investor worries over the unresolved U.S.-China trade dispute's effects on the world economy, while oil gained more than 1% as Middle East tensions remained elevated.

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Reuters Mon, 23 Sep 2019 04:57:35 -0400

The head of Turkey's Hoteliers Federation said on Monday the collapse of British tourism agency Thomas Cook means Turkey could see 600,000-700,000 fewer tourists annually.

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Reuters Mon, 23 Sep 2019 04:51:42 -0400

Thomas Cook said there were around 140,000 people currently traveling with its German subsidiaries, with a further 21,000 booked to depart on Monday and Tuesday.

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Reuters Mon, 23 Sep 2019 04:50:50 -0400

Spain's airport operator Aena said on Monday 46 flights operated by collapsed British travel group Thomas Cook have been canceled.

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Reuters Mon, 23 Sep 2019 04:48:14 -0400

Flights by collapsed tour operator Thomas Cook's German subsidiary Condor were operating as normal and there is no need for a major repatriation mission, a spokesman for the German Aviation Association (BDL) said on Monday.

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Reuters Mon, 23 Sep 2019 04:45:56 -0400

Saga Plc said on Monday it was securing alternative flights, where possible, for customers who are due to travel imminently and have been impacted by the collapse of Thomas Cook .

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Reuters Mon, 23 Sep 2019 04:45:47 -0400

Lufthansa has no plans to acquire insolvent British travel company Thomas Cook , the airline told German newspaper Die Welt on Monday.

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Reuters Mon, 23 Sep 2019 04:45:02 -0400

About 50,000 tourists are stranded in Greece, mainly on islands, after British travel firm Thomas Cook collapsed, a Greek tourism ministry official told Reuters on Monday.

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Reuters Mon, 23 Sep 2019 04:29:48 -0400

Thomas Cook , the world's oldest travel firm, collapsed on Monday, stranding hundreds of thousands of holidaymakers around the globe and sparking the largest peacetime repatriation effort in British history.

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Reuters Mon, 23 Sep 2019 04:15:23 -0400

Thomas Cook's collapse boosted shares in TUI and budget airlines easyJet and Ryanair on Monday as investors pinned hopes on the tour operator's closure cutting capacity in the saturated European holiday market.

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Reuters Mon, 23 Sep 2019 04:03:36 -0400

The Turkish finance and tourism ministries are working on a loan support package for local companies affected by the collapse of travel firm Thomas Cook , the Tourism Ministry said on Monday.

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Reuters Mon, 23 Sep 2019 04:02:55 -0400

Vivendi has decided not to exercise withdrawal rights over its Mediaset holding as a deadline to liquidate the stake in the Italian broadcaster expired at the weekend, two sources close to the matter said on Monday.

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Reuters Mon, 23 Sep 2019 04:01:18 -0400

The British government has plans in place to bring home stranded holidaymakers if Thomas Cook goes out of business, an event that would likely spark chaotic scenes at resorts and airports around the world.

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Reuters Mon, 23 Sep 2019 03:42:09 -0400

Aircraft leasing companies are launching moves to recover dozens of Airbus passenger planes after the collapse of British travel group Thomas Cook , market sources said.

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Reuters Mon, 23 Sep 2019 03:42:09 -0400

Thomas Cook bosses should have to pay back any bonuses they have received, Britain's opposition Labour Party finance spokesman John McDonnell said on Monday following the travel firm's collapse.

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Reuters Mon, 23 Sep 2019 03:34:10 -0400

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