How to Trade Earnings Season
Strategies, data sources, and risk management for earnings announcements
Earnings announcements are the highest-volatility regular events in the stock market. A company can move 5-20% in a single session based on its quarterly results. Understanding the dynamics around earnings gives you a significant edge.
Key Concepts
- Earnings Surprise — When actual EPS differs from consensus estimate. Positive surprise often = stock up, but not always.
- IV Crush — Implied volatility spikes before earnings and collapses after. Options lose value even if you get direction right.
- Pre-Earnings Drift — Stocks often drift in the direction of the eventual surprise in the weeks before earnings.
- Post-Earnings Drift — Surprises tend to have continued price impact for days/weeks after the announcement.
- Whisper Numbers — Unofficial expectations that may differ from published consensus estimates.
Data iGotFomo Provides
Our earnings intelligence system analyzes: • Historical earnings surprise patterns (last 4+ quarters) • Peer group performance and sector trends • Options-implied expected move vs historical realized moves • Insider trading activity leading up to the announcement • Analyst revision momentum and estimate dispersion The AI generates a predicted surprise direction, confidence level, and suggested trading approach for each upcoming earnings report.
Common Strategies
- Straddle/Strangle — Buy both calls and puts before earnings. Profits from big move either direction.
- Iron Condor — Sell options around expected move. Profits if stock stays within range (benefits from IV crush).
- Pre-Earnings Run — Buy shares/calls 1-2 weeks before based on positive convergence signals.
- Post-Earnings Continuation — Enter after earnings if surprise direction matches convergence signals.