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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.

Tilray Inc. (NASDAQ: TLRY) earnings expectation, Q2 2022 Earnings Per Share of $0.009

Posted on Jan 08, 2022 by Neha Gupta

Tilray Inc. (NASDAQ: TLRY) earnings expectation, Q2 2022 Earnings Per Share of $0.009

Tilray Inc. (NASDAQ: TLRY) is expected to release its Q2 2022 earnings on Monday, January 10, 2022, before market open.

What to look for

In 2021 the company had an eventful year, and from a price perspective, it has been on a skid. This is an opportunity for some, considering the company is a bigger player in the cannabis sector. Although the company reported a 43% sales increase in the last quarter, it still lost $35 million. There are questions regarding the company's business model, and when the company releases quarterly results, investors will be keen on what the company is doing to produce cannabis profitably.

Earnings: Stockearnings Estimated EPS for the current quarter under review is $0.09 per share. In its last earnings release, the company had earnings per share of $0.08, missing analysts estimates of$0.06. Historical EPS Performance for the past 12 quarters shows that the company has topped estimates twice and missed estimates ten times (83%).

Revenue: In the last quarter, the company had revenue of $168 million relative to analysts’ estimates of $174 million a year ago. The increase in revenue resulted from an increase in net cannabis revenue by 38% beverage alcohol revenue of $15 million after the acquisition of SweetWater and $15 million wellness revenue from Manitoba Harvest.

Stock movement: Tilray shares have lost 31.5% since the company released its last quarter earnings. Notably, TLRY shares have been DOWN 10 times out of the past 14 quarters. So, the historical price reaction suggests a 71% probability of the share price going DOWN once the company reports its fiscal Q2 2022 earnings. According to the Stockearning algorithm, the predicted first-day move is 10%, while the predicted move on the seventh day is 17%.

What analysts are saying

Piper Sandler analyst Michael Lavery has slashed Tilray’s price target to $8 from $13 but maintains a Hold rating on the stock. Lavery stated that the company stands out among competitors because of its direct access to the European Union. However, Canadian market dynamics are impacting pace. As a result, Lavery said he's decreasing his forecasts owing to "strong" competition in Canada, which has resulted in "substantial" share loss, as well as some unanticipated inventory destocking.

Barclays analyst Gaurav Jain commenced coverage on the stock with a Sell rating and a $10 price target. In a research note, Jain informs investors that the cannabis operator has been aggressive in its deal-making and that it is utilizing its "own pricey shares" rather than cash for these purchases, which can create "(extremely) long-term shareholder value." As a result, Tilray's investor expectations, according to the analyst, are too high.

Cantor Fitzgerald analyst Pablo Zuanic has downgraded Tilray from Buy to Hold, with a price target of $11.80, down from $18.00. Canopy Growth (CGC) is ahead of Tilray in developing a US ecosystem, has a better balance sheet, and Constellation Brands (STZ) as a backer, according to Zuanic, who also claims that Canopy's CPG segment is more established than Tilray's. In a research note, Zuanic also warns investors that while Tilray's management has articulated a $4 billion sales objective by 2024, he believes M&A will be the driving factor of that growth path for them.

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Neha has a passion for understanding the real value of stocks in publicly traded markets. She has a BA in Finance and a Masters in microeconomics. Anne has worked as a consultant advising buy-side firms and long-only equity fund managers. At stocksearning.com, she anchors our fundamental research writing desk.

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