Profits from market reactions to corporate earnings surprises
| Strategy Type | Earnings Event / Corporate Fundamental Trading |
| Market Outlook | Profits from market reactions to corporate earnings surprises |
| Risk Profile | Moderate-High - earnings can gap significantly |
| Reward Profile | Large moves possible on surprises (3-15% single stock, 30-100+ points index) |
| Time Horizon | Event-based (hours to days post-earnings) |
| Iv Environment | IV typically elevated pre-earnings and crushes post |
| Breakeven | Win rate depends on surprise detection and reaction trading |
| Primary Instruments | S&P 500 E-mini, NASDAQ 100 E-mini, Sector ETFs, Single Stock CFDs |
| Mas Compliance | MAS regulated brokers required for futures/CFD trading |
| Trading Hours | US earnings typically released 4-5 AM SGT (pre-market) or 5-6 AM SGT (after-hours) |
| Contract Size | E-mini S&P: USD50 per point; E-mini NASDAQ: USD20 per point |
| Settlement | Cash settled futures |
| Tax Treatment | No capital gains tax for individuals in Singapore |
| Margin Requirements | Consider increased margin during earnings season |
| Cdp Account | Not required for futures/CFD |
| Singapore Relevance | US earnings releases occur early morning SGT - ideal for Asian traders to position before US session or react to after-hours releases |
The difference between actual reported EPS/revenue and analyst estimates. Beating estimates is a positive surprise (bullish), missing is negative (bearish).
Quarterly, typically before market open (pre-market) or after close (after-hours). US companies mostly report in 6-week windows each quarter.
The company's own projection for future quarters/year. Often moves stocks more than current results because stocks are valued on future earnings.
The tendency for stocks to continue moving in the direction of the earnings surprise for days to weeks after the announcement.
Pre-earnings trading is risky due to binary uncertainty. Most traders should wait for results then react or trade the drift.
The sharp drop in implied volatility after earnings. Options are expensive before earnings; after, IV drops, reducing option values even if stock moves.
Large influential companies (AAPL, NVDA, JPM) whose results signal sector trends. Their earnings move entire sectors and indices.
If guidance is lowered, beat was low quality (one-time items), expectations were higher than published (whisper number), or outlook concerns overshadow current beat.
If bellwether (e.g., NVDA) beats strongly, trade sector ETF (e.g., SMH) long. Bellwether results lift entire sector.
Reaction trading enters immediately after results. Drift trading waits for Day 2-5 to capture the continued move. Both are valid strategies.
Assessing if earnings are sustainable: cash flow confirmation, recurring vs one-time, operational vs financial engineering. High quality beats have stronger drift.
Use historical beat rate, estimate revision momentum, peer results, macro factors, management track record, and alternative data (satellite, credit card, web traffic).
Waiting 15-60 minutes after release for initial volatility to settle and conference call to complete. Gives full picture without speed disadvantage.
Track all positions with upcoming earnings. Limit total binary exposure to 20-30% of portfolio. Reduce or hedge excess exposure before earnings.
Use 3-5 years of historical earnings, estimates, and prices. Walk-forward test. Segment by market cap/sector. Monitor for edge decay over time.
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