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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.

Predicted Move (Volatility)

Similar to Implied Volatility in Options. Expected volatility % based on our Proprietary Volatility Predication Model. We are expecting that stock price will likely to reach % in either direction by the end of next trading session after Earnings are released and not necessarily the closing volatility %.

Why is it important?

    This indicator helps

  1. Knowing expected volatility in stocks after Earnings helps to decide trading stocks before Earnings Announcement.
  2. Taking Advantage of volatility collapse following Earnings Results by using Advance Options strategies such as Spread and Straddles.

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.

Earnings Calender

When 100’s of companies release Earnings on the same day, it becomes very difficult to choose the right Earnings to trade or follow for investment purpose. So, we came up with a Filtering Tool for our Earnings Calendar. Sign Up Now and try our

filtering tool to screen Earnings Calendar

.

Predicted Move

Market Cap

Average Daily Volume

Stock Price



Symbol/Company Earning Date Earning Time Predicted Move
Next Day
Predicted Move
After 7 Days
Options Type EST EPS Market Cap Previous Closing
Price

Stock Earnings Calendar Frequently Asked Questions

What is Stock Earnings Calendar?

Stock Earnings Calendar shows the exact date and time a public company is slated to release its quarterly or full-year financial results. By law, listed companies must inform investors in advance when they are set to release results and performance metrics of a given accounting period.

Upcoming earnings are some of the most awaited in the capital markets. Investors analyze the reports to get a clear picture of how a company is doing and how it is likely to perform in the future. The reports also play a key role in investment decisions that investors make. Conversely, it gives investors an opportunity to track the performance of a company timely.

How Are Stocks Earnings get reported?

At the end of each quarter or financial year, public companies are required to file their financial results with the Securities and Exchange Commission. Filing is one of the strict rules that companies agree to while going public.

The SEC requires companies to report earnings detailing how they performed in the given accounting period. The results must be made available for every investor to analyze. It is important to note that the stocks earnings report differ from one company to another as companies report at different times during the year.

What do “Before Open” and “After Close” mean for earnings announcement?

When a company schedules earnings ‘before open,’ it essentially means making the results available before the markets open. While stock markets in the US open at 09:00 hours, a company can schedule to report earnings minutes or hours to the opening time.

‘After close’ translates to making results available after the markets close after normal trading hours. While markets close at 23:30 hrs, a company can make its results available a few minutes after close.

Why Are Corporate Earnings Important for fundamental analysis?

Company earnings are important as they allow investors to gauge how a company performed over a given period. Investors analyze reports to gauge how a company is likely to perform in the future and how their investments are likely to pan out.

Conversely, investors pay close watch to the corporate announcements to know when a company is set to report, therefore carry out an in-depth fundamental analysis.

Is corporate fundamental analysis important for investing or trading?

Company analysis is important as it allows investors to feel whether a stock is a buy or a sell, depending on the results. Likewise, investors pay close watch to the company earnings transcripts to know when a company is set to report its financial results conversely analyze them.

Is it better to Buy Stocks pre-earnings or into-earnings, or after-earnings?

The best time to buy a stock comes down to a number of things and not the earnings results only. Investors bullish about how a company performed during a given accounting period would often buy the stock pre-earnings in anticipation of a major price bump.

However, if skeptical or unsure of the kind of numbers a company is likely to post, most investors wait after earnings to buy, on results topping estimates. Likewise, the trade earnings announcements comes down to a number of things.

What happens when the company reports great earnings?

Stock prices often explode whenever companies report great earnings that top guidance as well as analyst’s estimates. Solid financial results signal a company is doing well and in a phase of robust growth, likewise triggering a buying spree among investors.

How can we find profitable trades from the Earnings Announcements?

It is advisable only to trade earnings Announcements reports once they are out and after analyzing them. The best earnings report likely to fuel a price bump, are those that signal and affirm underlying growth. Such earnings reports are synonymous with revenues and earnings topping estimates.

How many earnings seasons are in any given year?

Generally, there are four stock earnings seasons in a year. The sessions come into play a few weeks after each quarter comes to an end. The first-quarter earnings season is between April and May while Q2 stock earnings season runs between July and August and Q3 stock earnings season runs between October and November. In the stock earnings season, the Q4 season runs between January and February.

Predicted Move (Volatility) - 7th Days

Expected volatility on 7th day since Earnings results.

Why is it important?
  • If Historical price change on 7th day is higher than price change on next day, stock tends to gain more from Earnings result. It supports Buy In Post-Earnings strategy.
Lower Upside reaction on 7th day
  • If Historical price change on 7th day is less than price change on next day, stock tends to give up from next price gain. It supports Sell In News strategy.
Further Downside reaction on 7th day
  • If Historical price change on 7th day is less than next day drop, stock tends to drop even more from Earnings result.
Less Downside reaction on 7th day
  • If Historical price change on 7th day is less than next day drop, stock tends to recover from next price drop. It supports Buy In Dip strategy.

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