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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.

Caterpillar Inc (CAT) Earnings Date

Add to Watchlist (Why?)
Caterpillar Inc has confirmed Earnings date and time. It is on Fri 31 Jan (In 48 Days).
The Algorithm predicts "% Predicted Move After Earnings Announcement" (PMAEA) for CAT three weeks prior to earnings date. Knowing PMAEA for CAT three weeks before Earnings Announcement can provide unique advantages in trading Earnings.
Please visit FAQ section to learn on how we calculate PMAEA for CAT and how we use it to trade Earnings successfully.

Earnings Date : Fri 31 Jan (In 48 Days)   

Before Market Open (Confirmed)
Following Earnings result, share price were UP 20 times out of last 39 Qtrs

Since Last Earnings 9.8%

Price at Last Earnings: 133.69 Previous Closing Price: 146.78

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  • Predicted Move on 1st Day: Login to view
    PE Ratio: 758.66
  • Predicted Move on 7th Day: Login to view
    Estimated EPS: 2.40
  • Avg Daily Vol / Next Day Vol: 3,432,500 / 16,595,302
    Short Ratio: 4.90

Stock Price Change Since Last Earnings Released:   9.8%

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Caterpillar Inc (CAT) Frequently Asked Questions

1. What do you mean by "% Predicted Move After Earnings Announcement" (PMAEA) for CAT?

It is non-directional predicted move in regular session after Earnings Announcement. We are expecting that stock price for CAT will likely to reach % in either direction by the end of next regular trading session after Earnings are released and not necessarily the closing price.

2. Why is it important for me to know "Predicted Move" for CAT

If you are a stock trader or portfolio manager and if you have CAT in your portfolio, you don't want to wake up in the morning on Earnings Announcement Day and see your portfolio down by 10% or more. Therefore, If you know Predicted Move for CAT three weeks before Earnings Announcement, you can have enough time to design hedging strategy which can give you protection from a big drop which could be caused by bad Earnings result.

We help our hedge managers clients to build hedging strategy which provides protection from big drop after Earnings Announcement. - If you are day trader and if you know the predicted move for CAT three weeks before Earnings Announcement, it can help you to decide whether to trade stock into Earnings or you should stay away from it. If you are Options trader, you can take advantage of predicted move for CAT by using Volatility Rush, Volatility-Crush and Ride-the-wave strategies.

3.What is Predicted Move After Earnings Announcement(PMAEA) for CAT? How can I use PMAEA to make profitable trades in Earnings Season?

Predicted Move for UN is Predicted Move for CAT is 3%. You can use PMAEA for Volatility-Rush and Volatility-Crush trading strategies.

4. How do you calculate PMAEA for CAT ?

Our algorithm analyses following data for CAT to calculate Predicted Move:

  • a. Historical Stock Price Reaction for CAT following Earnings Result
  • b. Options Supply and Demand activities into Earnings for CAT
  • c. Company Fundamentals of CAT
  • d. Stock Price Reaction following Earnings Result of Peer Companies in Current Quarter.

5. What is "Predicted Move on the 7th Day" (PM7thDay)? How can I use PM7thDay for CAT in my trading strategies?

PM7thDay for CAT is 4%. This proprietary indicator for CAT can be used in Ride-the-wave strategy.

6. What is the next day trading volume for CAT?

This is a trading volume for CAT after Earning has been released. It is different from a average daily volume for CAT. Usually, it is 5 to 6 times higher than average daily volume. Next Day Volume for CAT is 16,595,302. Go to tab to learn how you can use next day trading volume for CAT.

7. CAT has moved UP 3% since last Earnings. How can I use CAT's move in my trading?

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.

8. What is the Options strategy for CAT listed on this Quote Page?

Predicted Move for CAT is 3%. That means we are expecting the stock CAT to move 3%. If we sell Puts at strike price close to 6%, the stock is less likely to reach the strike price. As a result, Options for CAT could expire worthless. You get to keep the whole premium.

This is a short term Option strategy to take advantage of High Volatility from Earning Announcement of CAT. Proceed with caution. Strategy has degree of success but there are no guarantees. Ideally the options for CAT will expire worthless. But if the CAT stock falls to your strike price, you then need to buy the stock. This strategy for CAT is independent from the Fast Money Trader (1-Day Hold) and Weekly Winners (7-Day Hold) strategies.

The estimated EPS for this quarter is 2.40. Historical EPS Performance for last 12 Qtrs is
Total Beat: 9 (75%) Total Meet: 0 (0%) Total Miss: 3 (25%)

Want to download historical Est vs Actual EPS Data for CAT? Sign Up Now for FREE Trial

The EPS Chart for CAT contains the comparison between estimated EPS provided by Wall Street Analysts and Actual EPS delivered by CAT. It also provides the future guidance information for upcoming four quarters.

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Below table tells us that how CAT has been historically reacting after Earnings Announcement (EA). Following Earnings result, share price were UP 20 times out of last 39 Qtrs
Next Day Volume - Average Next Day Volume is 16,595,302 and Average Daily Volume is 3,432,500. This data point is very helpful if you choose to trade Earnings Result of CAT in the same Extended Trading Hours as it is announced. If the CAT trading volume in extended hours is less than 50% of next day volume, there is a great amount of probability for the stock to move in that direction following regular trading session.
Move On 7th Calendar Day - Below table also includes historical stock movement of CAT on 7th day after EA. This data point is important for Ride-the-wave strategy.

Want to view Historical Price Change in Earnings (Last 30 Quarters) for CAT? Sign Up Now for FREE Trial

Historical Price Change in Earnings

  • Earning Date
    Closing Price Before Earning
    Next Day Closing Price
    Next Day Price Change (%)
    Next Day Volume
    On 7th Day Closing Price
    On 7th Day Price Change (%)
  • 10/23/2019
    133.69
    135.34
    1.23%
    11,307,592
    141.33
    5.71%
  • 07/24/2019
    138.10
    131.91
    -4.48%
    12,664,908
    132.95
    -3.73%
  • 04/24/2019
    142.03
    137.73
    -3.03%
    8,694,391
    139.42
    -1.84%
  • 01/28/2019
    136.86
    124.37
    -9.13%
    17,421,414
    130.91
    -4.35%
  • 10/23/2018
    128.71
    118.98
    -7.56%
    24,113,350
    113.98
    -11.44%
  • 07/30/2018
    142.56
    139.75
    -1.97%
    13,837,702
    138.51
    -2.84%
The below table contains historical volatility in regular trading session after Earnings Announcement EA for CAT.
This data point is very helpful for gap trading because you could have a company that swings 5% +- but their final percent move is only a fraction. The reason why a stock not necessarily is very volatile after EA is because the investors are digesting information provided by companies in conformance call.

Sign Up Now for FREE Trial and view last 25 quarters to see if CAT is the perfect candidate for gap trading.

Want to download historical Volatility in Earnings (Last 25 Quarters) ? Sign Up Now for FREE Trial

Historical Volatility

Next Day
  • Earning Date
    Open Price
    Low Price
    High Price
    Close Price
    % Volatility (High-Low)
    % Closing Price Change
  • 10/23/2019
    134.23
    130.70
    135.99
    135.34
    4.00%
    1.23%
  • 07/24/2019
    130.98
    128.45
    134.31
    131.91
    4.60%
    -4.48%
  • 04/24/2019
    139.75
    136.56
    140.30
    137.73
    2.70%
    -3.03%
  • 01/28/2019
    126.99
    123.15
    127.80
    124.37
    3.80%
    -9.13%
  • 10/23/2018
    119.68
    115.62
    122.50
    118.98
    6.00%
    -7.56%
  • 07/30/2018
    145.71
    139.06
    146.70
    139.75
    5.50%
    -1.97%

Our Advance Stock Chart for CAT is one-stop-shop for all technical charting analysis. Here is what you can do with our chart.

  • 1. Perform the technical analysis on CAT
  • 2. Compare CAT with other companies
  • 3. Add an events calendar on chart.

You can also save the CAT chart. Here is how you can do it:

  • 1. Click on Camera icon located on top right hand side corner.
  • 2. New tab will be opened. In the new tab, right click and select "Save Image"

You can personalize the CAT chart by modifying the default symbol, watch-list, adding tools for technical analysis and a lot more.

Sign Up Now for FREE Trial and personalize the CAT chart by modifying the default symbol, watch-list, adding tools for technical analysis and a lot more.

% 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.

Historical Volatility Next Day

Next Day Volatility (% Day High - % Day Low). It is a different from % closing price.

Why is it Important?

It is a very helpful indicator for gap trading because you could have a company that swings 5% +- but their final percent move is only a fraction.

Benefit of adding stock into watchlist:

1. Earning Dates Reminder: You will receive email reminders prior to the earnings date. Here is reminder frequency:

  • a. Sunday Alert: Last Sunday of Earnings Dates at 6PM EST
  • b. Two Days in Advance Alert: Two days before Earnings Date at 12PM EST
  • c. Same Day Alert: The Day of Earnings at 12:00AM EST

Reminder emails also include our proprietary predictive indicator which predicts the next-day volatility in earnings.

2. Proprietary Indicators in Watchlist: It includes more than just Earnings Date and time. It also includes our following proprietary indicators:

  • a. % changes Since Last Earnings
  • b. % Next Day Volatility Predictive Indicator

3. Write Comments for each Stock: It provides ability to write comments for each stock. With access to this feature, it becomes easier to keep track of a selected strategy for each stock.

Predicted Move (Volatility) - 7th Calendar Day

Expected volatility on 7th day since Earnings results.

Why is it Important?

Higher Upside reaction on 7th day
  • 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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