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📋 Earnings · Earnings Season

Earnings Season and Earnings Surprises
— a Trading Guide for Earnings Releases

Earnings season, which rolls around every quarter, is an event that can shake a stock's price hard. We explain the price impact of EPS consensus, surprises, and shocks, and trading strategy around an earnings release.

Written by Dawn · IT Engineer · Published
💡 Key takeaway — A stock can fall even on good earnings. "Buy the rumor, sell the news" — what matters is the expectation that's already priced in.

The Earnings Season Calendar

US-listed companies report earnings every quarter. The main earnings seasons cluster in January, April, July, and October (1), roughly 2–6 weeks after each quarter ends. Large companies (big tech, financial firms, and so on) report first and influence the market's overall direction.

EPS Consensus vs. Actual

EPS (Earnings Per Share) is net income divided by the number of shares outstanding. The average of analysts' EPS estimates is called the consensus. When actual EPS beats the consensus, it's called an earnings surprise; when it misses, it's called an earnings shock. How strongly the price reacts depends on the size of the surprise (the beat rate).

"Buy the Rumor, Sell the News"

This is a pattern where the price rises on anticipation before the release, and then falls even when the actual earnings turn out good. This happens when the anticipated rally has already been priced in beforehand, and the release itself becomes the excuse to take profit. The reverse also happens — a stock rising even after bad earnings, because the bad news was already priced in.

Options IV Spikes Before an Earnings Release

Ahead of an earnings release, an option's implied volatility (IV) spikes because of the uncertainty around the result. Once that uncertainty resolves after the release, IV can drop sharply (an IV crush), and the option's price can collapse along with it. Buying an option before earnings needs to account for this IV-crush risk.

Managing Position Risk Around an Earnings Release

  • Check in advance which of your holdings have earnings coming up, and size your position accordingly
  • Holding a large position right before the release is close to gambling
  • It's safer to enter after confirming the reaction post-release (check for a gap up or gap down)
  • Check technical signals on DawnScan, and manage the earnings calendar separately
Caution — An earnings release is an event whose outcome is hard to predict. All information here is for reference only, and the investment decision and its outcome are your own responsibility.
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Frequently Asked Questions

What is earnings season?

Earnings season is the stretch when listed companies report their quarterly results in a concentrated wave. In the US, it runs roughly 2–6 weeks after each quarter ends, with January, April, July, and October as the main earnings seasons. During this stretch, EPS (earnings per share) and revenue get compared against the analyst consensus, moving the stock price significantly.

Does a big EPS surprise always push the price up?

No. There are cases where the price falls even though results beat consensus by a wide margin. This happens when the surprise was already priced in beforehand (buy the rumor). It also happens when earnings are good but guidance (the outlook) disappoints, or when the release itself becomes the excuse for a wave of profit-taking.

Should I buy or sell before an earnings release?

Holding a position ahead of an earnings release carries high uncertainty. Whether it's a surprise or a shock is hard to predict, and options IV (implied volatility) is elevated, so an IV crush after the release can actually cause a loss. It's safer to trim your position size before the release and enter only after confirming the post-release reaction.

How does the DawnScan scanner relate to earnings season?

The DawnScan scanner runs on technical and supply/demand signals. During earnings season, a gap up or gap down from an earnings release can distort those technical signals. It's recommended to check your watchlist stocks' earnings dates in advance and reduce position risk right before a release.
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