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:

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
Sell-to-close after 7-10 days, or possibly earlier if a desired price target is reached

Similarly,

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
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:

Stocks exhibiting positive post-EA price moves are buy-candidates
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:

Earnings Date Start Date : Current Date + -1 Day
Earnings Date End Date : Current Date + -2 Days
Predicted Move (Next Day) Max : 7%
Predicted Move (On 7th Day) Min : 7%

Strategy Guideline:

Buy the stock if stock has reacted positively. Short the stock if stock has reacted negatively (see above).
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.

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:

Earnings Date Start Date : Current Date + 1
Earnings Date End Date : Current Date + 1
Predicted Move (Next Day) Max : 4%
Options Type: Weekly

Strategy Guideline:

Options Strategy: Sell Call and Put
Options Strike Price: Current Stock Price – (% Predicated Move x 2)
Expiration Date: It should generally be the closest expiry immediately after the EA.
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:

Earnings Date Start Date : Current Date + 15 Days
Earnings Date End Date : Current Date + 30 Days
Predicted Move (Next Day) Min : 5%
Options Type: Weekly or Monthly if that lines up with the two to three-week lead-time for entering the trade

Strategy Guideline:

Buy a Straddle at or close to the money two to three weeks pre-EA.
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.
Expiration date should generally be the closest expiry immediately after the EA.
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

Knowing expected volatility in stocks after Earnings helps to decide trading stocks before Earnings Announcement.
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.

Overpaying for a Cheap Stock? These 3 Stocks Show Why It Happens

Posted on Aug 26, 2026 by Grayson Cavern

Investors love a low valuation because it feels like a built-in margin of safety. A stock trading at 8x or 10x earnings appears to leave less room for disappointment than one trading at 30x or 40x. But the multiple only tells you what you are paying for a number. It does not tell you whether that number will still mean the same thing a year or two from now. You can overpay for a stock even at 8x earnings if those earnings are heading in the wrong direction. That is where cheap stocks can become expensive mistakes.

A stock can look cheap because investors are using yesterday’s economics to price tomorrow’s business. If earnings are heading lower, margins are under pressure, free cash flow is weakening, or the market permanently assigns the company a lower multiple, buying at 8x earnings can still turn out to be expensive.

Alphabet Inc (NASDAQ: GOOGL), Alibaba (NYSE: BABA), and Dell Technologies (NYSE: DELL) all give investors a version of the same temptation right now.

Alphabet

Alphabet is the one stock here where “cheap” gets genuinely confusing, because the underlying business is still firing on almost every cylinder. Quarterly revenue climbed 24% to $119.8 billion, Google Search and other revenue grew 17% to $63.3 billion, and Google Cloud exploded 82% to $24.8 billion, while operating income rose 30% to $40.8 billion.

Search is still growing, Cloud is accelerating, and Gemini is spreading through the ecosystem. But the low valuation only works as a bargain if those earnings remain durable enough to justify it. The company is spending heavily to defend that future. First-half capital expenditures reached $80.6 billion, while Q2 generated $39.1 billion in operating cash flow.

At $347.49, GOOGL sits above its 20-day SMA of $345.90, 50-day SMA of $342.42, and 200-day SMA of $332.42, leaving the chart constructive despite the recent pullback.

Alphabet can grow into its valuation, but the cheap-multiple argument gets weaker if AI forces the company to spend materially more just to defend the economics that made Search so valuable.

Alibaba

Alibaba may look cheap until you start asking what the market is actually discounting. Revenue grew 9% to RMB268.95 billion, while Alibaba Cloud’s external revenue accelerated 45% and Cloud’s EBITA margin reached 12%.

The core commerce engine, however, is not delivering the same kind of momentum. Customer management revenue fell 7%, while like-for-like growth was only 1% after excluding the impact of its new business development program.

The AI push is also consuming serious capital as adjusted EBITA fell 30% to RMB27.33 billion, while free cash flow swung to a RMB44.67 billion outflow as capital expenditures surged to RMB67.68 billion.

At $118.85, BABA trades below its 20-day SMA of $124.92 and 50-day SMA of $125.73, with the chart still reflecting a market that refuses to give the company a clean re-rating.

If Cloud becomes a much larger high-margin business, today’s valuation could look absurdly cheap. If capital intensity keeps rising while commerce barely grows, the discount may simply be the price investors should be paying.

Dell Technologies

Dell is already generating the kind of AI revenue that makes almost any valuation argument sound tempting. Revenue surged 88% to $43.8 billion, while the Infrastructure Solutions Group generated $26.9 billion, including $16.1 billion from AI-optimized servers and networking.

Yet the money moving through Dell’s servers tells a less spectacular story. Consolidated gross margin fell to 17.8% from 21.1%, while adjusted gross margin declined to 18.4% from 21.6%, as lower-margin AI server sales reshaped the revenue mix.

Dell’s AI boom is creating enormous growth without automatically creating Nvidia-style economics. Investors still need to know how much profit and cash flow survives after the costs required to generate those sales.

At $121.73, DELL trades above its 20-day SMA of $116.55, 50-day SMA of $111.68, and 200-day SMA of $101.72, showing that traders have already started rewarding the AI narrative.

But a rising chart cannot improve low-margin revenue. This is why AI sales must lift earnings and cash flow faster than they lift Dell’s costs.

Why Cheap Stocks Can Still Be Easy to Overpay For

The cheapest stock on a screener is not automatically the cheapest stock in the market.

Alphabet can look cheap while the economics of its biggest profit engine become more expensive to defend. Alibaba can look deeply discounted while heavier investment and slower core growth keep that discount alive. Dell can ride one of the market’s hottest trends while selling AI infrastructure with economics that remain far less attractive than the revenue numbers suggest. Cheap is not about paying the lowest multiple, but paying less than the future economics of the business are actually worth.