Navigating Earnings Season Like a Pro

Trading around earnings season is one of the most exciting—and unpredictable—periods in the stock market.

For traders, it can mean the difference between landing a big win or taking a painful loss. Stock prices often experience sharp moves before and after earnings reports, driven by investor expectations, company performance, and broader market sentiment.

The key question many traders ask is: Should I hold or sell before earnings?

The answer isn’t one-size-fits-all. It depends on multiple factors, including your risk tolerance, profit cushion, historical price action, and market conditions. In this guide, we’ll break down essential strategies to help while trading around earnings with confidence and make smarter trading decisions.

Key Factors to Consider Before Trading Around Earnings

Before making a decision, you should evaluate several critical factors that can influence a stock’s reaction to earnings.

Position Size and Profit Cushion

Your profit cushion—the percentage gain on your position before earnings—plays a major role in determining whether holding is worth the risk.

• Large cushion (20%+) – You have room to absorb potential downside, making it safer to hold through earnings.
• Medium cushion (7-15%) – Consider trimming your position to reduce exposure while still participating in potential upside.
• Small cushion (under 5%) – Trading around earnings could be risky, as a negative reaction might wipe out your gains or result in a loss.

If your cushion is small, reducing or exiting your position might be the smarter move.

Historical Earnings Volatility

Looking at how a stock has reacted to earnings in the past 3-5 quarters can provide valuable clues about potential price movement.

Ask yourself:

• Does the stock typically gap up or down after earnings?
• What is the average post-earnings move (percentage gain or loss)?
• Does it recover quickly from negative earnings reactions, or does it continue declining?

A stock with a history of extreme post-earnings moves may be riskier to hold compared to one that trades more predictably.

Implied Volatility and Expected Move

Options pricing provides insight into how much movement the market expects from a stock after earnings. This is measured through implied volatility and the expected move—the range in which the stock is likely to trade based on options market projections.

• If the expected move is greater than your profit cushion, holding could be risky.
• If the stock has low implied volatility, the market may not anticipate much movement, making it safer to hold.

Look for websites and brokerage platforms that offer expected move calculators, which can help you assess risk.

Overall Market and Sector Conditions

Even a great earnings report won’t guarantee a stock will rise if market conditions are weak. Broader trends matter:

• Bullish market conditions – Stocks are more likely to react positively to strong earnings.
• Bearish or uncertain markets – Even good earnings reports can be met with selling pressure.
• Sector strength – If your stock’s sector is performing well, it increases the chances of a positive post-earnings reaction.

Pay attention to how the market and the stock’s industry are performing when trading around earnings.

Should you Hold or Sell Before Earnings?

Based on the factors above, here are three potential strategies for trading around earnings.

Holding a Full Position

Best for:

• Large profit cushion (20%+).
• Strong technical setup.
• Historically stable post-earnings movement.

If you have a strong profit cushion and the stock has a history of positive or muted earnings reactions, holding may be a viable option. However, consider using a hedge against downside risk.

Trimming Your Position

Best for:

• Medium profit cushion (7-15%).
• Uncertain earnings history.
• Reducing risk while keeping some exposure.

If you’re unsure about trading around earnings, selling part of your position allows you to lock in profits while still benefiting if the stock moves higher.

Selling Entirely Before Earnings

Best for:

• Small profit cushion (under 5%).
• Highly volatile stocks.
• Uncertain macro conditions.

If the stock is known for big post-earnings swings and your profit cushion is small, selling before the report might be the safest choice.

Trading Around Earnings in Real-Time

After a company reports earnings, watching its after-hours or pre-market action can provide key insights.

Monitor Post-Earnings Volume & Price Action

• Stocks that gap up on high volume often continue higher.
• Stocks that gap down with heavy volume may indicate institutional selling.

Use Trading Screens for Earnings Watchlists

Many traders track post-earnings performance by setting up watchlists. Platforms like Deepvue offer earnings-specific screens, including:

• Earnings Next Week – Tracks upcoming earnings reports.

• Postmarket Movers – Highlights stocks making major moves after hours.

• Earnings Winners & Losers – Helps find stocks reacting positively or negatively.

The Power of High-Volume Gaps After Earnings

One of the strongest bullish signals traders look for when trading around earnings is a high-volume gap after earnings—especially when the volume reaches record levels.

Highest Volume Ever: A Key Signal

When a stock posts its highest daily trading volume ever on an earnings gap, it signals intense institutional buying. Hedge funds, mutual funds, and large investors—often called the smart money—are aggressively accumulating shares.

• Institutional demand fuels long-term trends – Large funds don’t buy and sell in a single day. If they’re stepping in with size, it’s usually the start of a sustained move.
• Massive volume confirms conviction – The more shares traded, the stronger the confirmation that investors believe in the company’s growth potential.
• High-volume gaps often lead to multi-month rallies – Stocks that experience their highest volume ever on an earnings move have a high probability of doubling in the next 6-8 months.

Examples of Earnings-Driven Rallies

Reddit reported strong revenue growth and higher-than-expected user engagement, leading to a major post-earnings gap up.

The stock reaction:

• Gapped up 12% on 3x average daily volume.
• Institutional buying pushed shares to new all-time highs.
• Within three months, the stock was up 65%.

Key takeaway: A gap of this magnitude, combined with record volume, signaled strong accumulation and led to a powerful rally.

Palantir beat revenue estimates and guided higher for future quarters, fueling investor optimism.

The stock reaction:

• Highest trading volume in over a year.
• Stock jumped 15% pre-market, confirming strong demand.
• Followed up with an 8-week rally, gaining over 70%.

Key takeaway: When volume spikes on an earnings gap, it often kickstarts a powerful multi-month uptrend.

How to Enter Stocks After Earnings

Even if you missed the initial earnings gap, there are still opportunities to enter when trading around earnings:

Final Thoughts: Mastering Trading Around Earnings

Trading around earnings season is full of opportunities, but it also comes with risks. By planning ahead and following the right strategy, you can:

• Avoid unnecessary risk.
• Capitalize on strong post-earnings moves.
• Identify high-probability setups.

Whether you choose to hold, trim, or sell before earnings, always base your decision on data, risk management, and market conditions—not emotions. Trading around earnings season presents both challenges and rewards, so stay prepared and trade smart!

Mastering Earnings Educational Video