Library
Research, concepts, and strategies behind Earnings Whispers.
The Quarter
Stretching from the close of one financial quarter to the earnings announcements of the next, stocks navigate a series of phases influenced heavily by investor sentiment and earnings quality. We explore the intricacies of Post-Earnings Announcement Drift (PEAD) and the tools traders can use to navigate these dynamics, underscoring the importance of aligning strategies with earnings expectations and market sentiment.
Earnings Whisper® Numbers
The whisper number serves as a more accurate barometer of the market's true earnings expectation. For a quarter of a century, the Earnings Whisper® number has held a remarkable track record as the most statistically precise estimate published. Its influence extends beyond precision — it can move prices significantly, particularly when actual results diverge from the consensus estimate.
Earnings Whisper® Grade
The Earnings Whisper Grade provides an insightful analysis of stock performance potential based on earnings expectations. It leverages decades of research dating back to Post-Earnings Announcement Drift (PEAD), discovered in 1968. The Grade interprets market sentiment — a complex mix of professional and individual investor expectations. Historically, A+ graded stocks have notably outperformed the market.
Earnings Whisper® Score
The Earnings Whisper Score helps improve trading odds before earnings announcements. By combining expectations from professional analysts with individual investors, it enables traders to outperform the overall market by measuring the likely Earnings Announcement Premium (EAP).
Power Rating
The Power Rating captures significant deviations between earnings results and expectations, identifying conditions that lead to short-term Post-Earnings Announcement Drift. It highlights the extreme dislocations that can occur, signaling potential opportunities for stock price movement during the first few days following an earnings release.
Post-Earnings Announcement Drift
Post-Earnings Announcement Drift (PEAD) is a market anomaly where stock prices gradually drift in the direction of an earnings surprise for weeks following its announcement. Despite efficient-market theories, PEAD still exists today — partly due to factors like the Earnings Whisper, an unofficial but often more accurate earnings estimate that savvy investors can exploit.
Earnings Expectation Life Cycle
The Earnings Expectation Life Cycle describes the evolution and adjustment of market expectations around a company's earnings. It begins when initial forecasts are made, then refines as new information arrives — from macro indicators to company news — growing more precise as the announcement approaches. After the announcement, the cycle restarts, offering insight into market dynamics and potential strategies.
Earnings Announcement Premium
The Earnings Announcement Premium is the phenomenon where stocks with positive earnings expectations generally appreciate before the announcement, while those with negative expectations often depreciate leading up to it. This trend highlights the market's anticipation and response to upcoming earnings news.
Earnings Estimate Revisions
A notable correlation exists between stock prices and earnings estimate revisions. Changes in analysts' estimates often foreshadow shifts in stock prices, reflecting the market's updated expectations. Tracking the direction of these revisions can be instrumental in investment decisions — and on a macro level, overarching revision trends offer insight into the market's overall health and direction.
Investor Sentiment Coming soon
Investor sentiment blends professional and individual investor expectations into a measure of market mood around a stock's earnings. Understanding how sentiment shifts — and how it diverges from fundamentals — can reveal opportunities and risks around earnings events.
Earnings Date Discrepancies Coming soon
Earnings dates are frequently unconfirmed or subject to change, and discrepancies between reported and actual dates can affect trading decisions. Understanding how and why these discrepancies arise helps traders avoid surprises and plan around genuine confirmed dates.
The Earnings Rule Coming soon
The Earnings Rule distills decades of research into a practical framework for approaching earnings events. Built on the foundation of Post-Earnings Announcement Drift, it offers a disciplined way to align trades with earnings expectations and market sentiment.
Earnings Volatility Coming soon
Earnings volatility measures the expected magnitude of a stock's move around its announcement. Derived from options pricing, it frames the market's uncertainty and helps traders size positions and choose strategies appropriate to the anticipated move.
Covered Call / Bull Call Spread Coming soon
Covered calls and bull call spreads are options strategies for expressing a moderately bullish view around earnings while managing risk. Each balances premium, upside, and downside differently — understanding the tradeoffs helps match the strategy to your earnings expectation.
Straddles Coming soon
A straddle profits from a large move in either direction, making it a natural fit for the volatility around earnings announcements. Understanding how implied volatility, cost, and the expected move interact is key to using straddles effectively around earnings.
Strangles Coming soon
A strangle, like a straddle, profits from a large move in either direction but at lower cost and with wider breakevens. It's a common way to trade the volatility around earnings events when you expect a significant move but are unsure of direction.