This strategy focuses on price action triggered by earnings announcements. When a company beats consensus estimates (earnings surprise), traders take a long position to capture the upside. If results fall short (earnings shock), a short or sell position is taken to profit from the drop.
The charts above show average 5-day return distributions after earnings surprises (left) and earnings shocks (right). Post-surprise returns tend to be skewed positively, while shocks often result in sharp short-term declines.
Identify earnings dates and consensus estimates in advance.
Anticipate large price moves if actual results deviate significantly from expectations.
(Apple’s earnings will be announced May 1, 2025, 4:00 p.m. EDT, or May 2, 5:00 a.m. KST.)
Based on the nature of the surprise or shock, establish a position immediately following the announcement.
Implement risk controls like stop-losses to manage volatility.
This strategy offers a rare opportunity to profit from clearly defined events, independent of broader market trends.
This heatmap shows simulated trading results based on earnings surprises. The left chart shows average returns, and the right shows win rates, based on when investors bought before and sold after the earnings release.
Notably, buying 6 days before and selling shortly after the earnings event yielded a 78.2% win rate across 55 earnings events.
In contrast, during earnings shocks, pre-event short positions performed better, while post-announcement trades suffered notable losses. Win rates were also higher for pre-event sellers.
This final heatmap generalizes event-driven strategies across all earnings events. While certain windows are effective, the consistency of outperformance is rare over the long term in upward-trending markets.
Event-driven strategies can yield powerful short-term returns, especially during earnings season. However, they require precision and experience. For most retail investors, a better long-term approach may be to hold fundamentally strong names like Apple and navigate short-term noise with patience and discipline.
Apple’s May 1 earnings may offer a near-term opportunity — but investors must also weigh broader market risks, including macroeconomic uncertainty and U.S.–China trade tensions, before reacting.
All posts by Sellsmart are for informational purposes only. Final investment decisions should be made with careful judgment and at the investor’s own risk.
The content of this post may be inaccurate, and any profits or losses resulting from trades are solely the responsibility of the investor.
Core16 may hold positions in the stocks mentioned in this post and may buy or sell them at any time.
