How to Trade Earnings: Expected Moves, Gaps and a Real P&G Trade
Bek Iigilikov
To trade earnings is to open a position shortly before or after a company reports its quarterly results, aiming to profit from the price move the report causes. Learning how to trade earnings starts with one fact: the market has usually priced in a move already, and you profit only if the real move differs from what that price implies.
This guide is for self-directed investors who want to trade around earnings reports without gambling on them. You will learn how to read the expected move from options prices, why a beat is not enough, how a real Procter & Gamble trade worked in October 2026, and what 1,202 closed earnings trades from our own funded account show about wins, losses and costs.
Key takeaways
Beating estimates is normal. 84% of S&P 500 companies that reported for Q3 2026 beat EPS estimates, according to FactSet. Stocks move on how results and guidance compare with what was priced in.
Options prices show the expected move. Add the at-the-money call and put prices and divide by the share price. Before P&G's October 22, 2026 report, options priced about 3% either way; the stock rose 5.5%.
In 1,202 closed Earnings AI stock trades, 72.8% made money, but the average loss (−15.84%) was 2.3 times the average win (+7.01%). That left +0.80% per trade after commissions.
A stop-loss order does not protect you from an overnight gap. Once triggered, it becomes a market order and fills at the next available price.
Research by Charles Martineau finds that the slow drift after earnings surprises has been absent in large stocks since 2006, so buying after a beat and waiting is weaker than it used to be.
What does it mean to trade earnings?
Trading earnings means taking a position because of a scheduled earnings report, not because of a long-term view of the business. US-listed companies report four times a year. The report includes revenue, earnings per share (EPS) and, often, guidance for the coming quarters. Because a lot of new information arrives at once, the share price can jump more in one session than it does in a typical month.
Most reports come out before the market opens or after it closes. That means the price usually gaps: it opens at a new level, with no trading in between. Whatever you hold when the news lands, you hold through the gap.
Earnings trade: a short-term position opened before or after a company's earnings report to profit from the price move it causes. Expected move: the size of move, in either direction, that options prices imply for the report.
Why do stocks move so much on earnings?
Stocks move on the gap between what a company reports and what investors expected, not on whether the numbers are good. Analysts publish EPS and revenue estimates, and the share price already reflects them. A beat that everyone expected moves little. A miss on guidance can sink a stock that beat on every number.
Beats are the norm, not the exception. In FactSet's count for Q3 2026, with 88% of S&P 500 companies reported, 84% beat EPS estimates and 74% beat revenue estimates. But the size of the beats was small: reported earnings came in 2.7% above estimates in aggregate, against a 5-year average of 7.5%.
Beating estimates is normal: S&P 500 Q3 2026 vs 5-year and 10-year averages
Q3 20265-year average10-year average
"While the percentage of S&P 500 companies reporting positive earnings surprises is above recent averages, the magnitude of earnings surprises is below recent averages."
— John Butters, Senior Earnings Analyst, FactSet, Earnings Insight (November 6, 2026)
So a headline beat tells you little. What moves the price is usually one of three things: the size of the beat compared with recent quarters, the guidance for the next quarter or year, and a detail the market was watching, such as sales volume or margins. When guidance changes, the forward earnings in the P/E ratio change too, and so does what the stock is worth.
Before a report, write down the two or three numbers the market cares most about for that company. Analysts usually say which ones in their previews. After the report, check those first, not the headline EPS.
How do you find a stock's expected earnings move?
Look at the options market. When a report is coming, options that expire just after it become more expensive, because buyers and sellers expect a bigger move. A common shortcut turns those prices into an expected move:
Expected move ≈ (price of the at-the-money call + price of the at-the-money put) ÷ share price. Use the first expiry after the report date. The result is a move in either direction, not a forecast of which way.
Many brokers show this number for you. It is the market's price for uncertainty, and it is often roughly right on average while being wrong on any single report. Procter & Gamble's last nine reports show both sides. Options priced an average move of 2.79%, and the average actual move was 2.70%. But single moves ranged from 1.0% to 5.5%, and the real move was bigger than the priced move four times out of nine.
P&G: move priced by options vs the move that happened, last nine earnings reports
Implied move (options)Actual move (size)
The expected move is a benchmark, not a target. If you buy options, you need a move bigger than the expected move just to break even. If you sell options, you profit only if the move is smaller. If you trade the shares, it tells you how big a gap to plan for.
What are the main ways to trade earnings?
There are five broad choices, and each bets on something different. The table shows what each needs to go right.
| Approach | What you need to be right about | Main risk |
|---|---|---|
| Buy or short the shares before the report, at a small size | Direction | A gap against you that a stop cannot prevent |
| Buy a call and a put (a straddle) | The move will be bigger than options priced | The move is smaller and both options lose value fast |
| Sell options or a defined-risk spread | The move will be smaller than options priced | A large move causes losses much bigger than the premium |
| Wait and trade the reaction | The first move will continue, or reverse | Most of the move often happens at the open |
| Hold your long-term position through it | Nothing short term; your view is about the business | A gap you were not prepared for, emotionally or in size |
For most self-directed investors, the shares are the simplest place to start. The risk is easy to see, there is no time decay, and you can size the position for the worst gap you can imagine. Options add leverage and a second thing to be right about, the size of the move.
How did a real earnings trade work? A P&G example
TruthSayer's Earnings AI took this trade in its funded account before members saw the alert. Each step shows what was known at the time, with sources listed at the end of this article.
- Know when it reports. P&G reported its fiscal first quarter of 2027 before the market opened on Thursday, October 22, 2026. To trade the report, the position had to be open by the close on Wednesday.
- Read the expected move. On October 21, Cboe noted that options priced a move of about 3% in either direction. On the $156.92 close, that is about $4.71, a range of roughly $152 to $162. Bloomberg options data a week earlier showed 2.6%.
- Check how the stock usually reacts. Over the previous eight reports, P&G's actual moves ranged from 1.0% to 4.1% and beat the priced move three times.
- Know what was expected. Analysts polled by LSEG expected core EPS of $1.88 and revenue of $22.8 billion. P&G had guided to fiscal 2027 core EPS of $6.89 to $7.11.
- Open the position. The Earnings AI alert read: "$PG reports earnings pre-market on October 22, 2026 ... We're long at $157.07." The position was 10 shares, or $1,570.70.
- The report. Core EPS was $2.00 and revenue $23.28 billion, with organic sales up 4%. P&G kept its EPS guidance even after raising its commodity cost estimate to about $1.4 billion from $1 billion. The stock closed at $165.62, up 5.5%.
- Exit and count the result. The position was sold on October 22 at $165.33. The gross gain was $82.60 (5.26%). After $9.98 in commission, the net gain was $72.62, or 4.62%, in one day.
- Check what waiting would have done. The next day, P&G closed at $161.11, 2.7% below its October 22 close. Holding one more day would have given back about half of the gain.
Three lessons stand out. The real move was about twice the priced move, which options buyers would have welcomed and options sellers would not. The stock rose even though P&G only kept its guidance, because organic sales growth of 4% was about double what analysts expected, according to Investing.com. And the exit was planned, so a strong day did not turn into a hope trade.
This was a winning trade. Below, the full record shows that losses matter more than any single win.
What are the biggest risks when trading earnings?
Gaps that skip your stop
A stop-loss order does not cap your loss through a report. As the SEC's Investor.gov explains, once the stop price is reached, a stop order becomes a market order. If a stock closes at $100 and opens at $80 after a bad report, a stop at $95 sells near $80, not at $95.
Losses that are bigger than wins
Earnings trades tend to win often and small, and lose less often but large. Our own record shows the pattern clearly.
Small wins, bigger losses: 1,202 closed Earnings AI stock trades by return
The most common result was a gain of 2% to 5% (283 trades). But 75 trades lost more than 20%, while only 56 gained more than 20%. With an average win of 7.01% and an average loss of 15.84%, a strategy needs to win about 69.3% of the time just to break even (15.84 ÷ (7.01 + 15.84)). Earnings AI's 72.8% clears that by 3.5 points.
Options that lose value after the report
The extra price built into options before a report usually drains out once the news is known, an effect traders call volatility crush. An option buyer can be right about the direction and still lose money if the move is smaller than the market priced.
Costs and taxes
Small edges are fragile. Earnings AI's published trades show a $9.98 commission per trade. On the $1,570.70 P&G position, that was 0.64% of the money invested, close to the whole +0.80% average edge. In the US, gains on positions held one year or less are short-term capital gains, taxed at ordinary income rates, according to the IRS. Our capital gains tax calculator shows the effect on your own numbers.
Earnings season packs hundreds of reports into a few weeks. Several positions open through the same week are not separate bets if they are all exposed to the same market mood. Count your total exposure, not just each trade.
Does buying after an earnings beat still work?
Much less than it used to. A lot of earnings advice says to buy companies that beat and hold them, because prices keep drifting in the direction of the surprise for weeks. Researchers called this post-earnings announcement drift, and it was one of the best-documented patterns in finance for decades. Recent evidence says it has largely gone in large stocks.
"In modern financial markets, stock prices fully reflect earnings surprises on the announcement date, leading to the disappearance of post-earnings announcement drifts (PEAD). For large stocks, PEAD have been non-existent since 2006"
— Charles Martineau, University of Toronto, "Rest in Peace Post-Earnings Announcement Drift," Critical Finance Review (2022)
Two other facts point the same way. When 84% of companies beat, a beat alone carries little news. And the price reaction itself is the information: when Walgreens beat on adjusted earnings and revenue on January 4, 2024, its shares closed 5% lower the same day because it cut its dividend, as our guide to value traps explains.
Our view: treat the report day as the event and plan around it. If you buy after a beat, you need a reason the market has not already priced in, not just the beat.
The TruthSayer Earnings Trade Plan: six steps
We use these six steps for any trade around a report. Write the answers down before you place the order; it takes about 20 minutes. The sizing rule is our working rule, not an industry standard.
- Confirm the timing. Find the report date and whether it comes before the open or after the close. That tells you when you must be in, and when the gap will happen.
- Price the expected move. Add the at-the-money call and put for the first expiry after the report and divide by the share price.
- Check the history. Compare the priced move with the actual move for the last eight reports. Note how often the real move was bigger.
- Write the thesis in one sentence. Include guidance and the one or two numbers the market is watching, not just EPS. If you cannot say why the market is wrong, do not trade.
- Size for the worst gap. Assume a loss of twice the expected move, or 20%, whichever is larger, and size the position so that loss is no more than 1% of your portfolio. On a $50,000 portfolio, that means a loss of $500 at most, so a position of no more than $2,500.
- Set three exits before you enter. Decide what you will do if you are right, if you are wrong, and if nothing much happens. Then follow it.
After every 20 to 30 trades, total your results: win rate, average win, average loss and the average return per trade after costs. Our stock profit calculator handles the per-trade arithmetic. A high win rate with a negative average is a losing strategy.
How does TruthSayer AI trade earnings?
Earnings AI scans US-listed companies ahead of their reports and opens positions in a funded account, typically one to four hours before the report. Members see each alert only after the trade is placed, and every trade, winners and losers, stays on the public list.
The record is mixed, and we publish it as it is. As of November 7, 2026, the Earnings AI page shows a 31.85% return since inception, against 35.09% for the S&P 500 over the same dates, so the strategy trails the index. It also shows a 72.8% historical win rate and an average hold of 29 days.
By our count of 1,202 closed stock trades, the median trade returned +2.53% and the average +0.80%. Holding periods vary more than the name "earnings trade" suggests:
| Holding period | Closed stock trades | Share |
|---|---|---|
| 1 day or less | 357 | 30.2% |
| 2 to 3 days | 130 | 11.0% |
| 4 to 7 days | 134 | 11.3% |
| 8 to 14 days | 151 | 12.8% |
| 15 to 30 days | 149 | 12.6% |
| 31 to 60 days | 107 | 9.1% |
| More than 60 days | 154 | 13.0% |
For how to read a record like this, see our guides on how to judge a signal service and backtested vs live-traded signals. TruthSayer AI claims compliance with GIPS®, the global performance reporting standard; see our GIPS reports and verification.
Earnings AI figures come from its public trade list on November 7, 2026: 1,202 closed stock trades (options and open trades excluded), with returns net of commissions as published; 1,182 had a recorded holding period. Win rate, averages, median and buckets are our calculations. S&P 500 beat rates come from FactSet. P&G prices are the last regular-session 15-minute bar from Intrinio.
Who should trade earnings, and who should not?
- A good fit: active investors who can check positions before the open and after the close during earnings season, accept losing trades, and keep each position small.
- A poor fit: investors who cannot stand a 20% overnight drop in a position, anyone using borrowed money, and small accounts where a $10 commission is a large share of each trade.
- Long-term investors: you do not need to trade earnings at all. Read the report for what it says about the business, and leave the one-day move to traders.
How much time and money does it take?
Plan on about 20 minutes per trade to check the expected move, the history and the estimates. Many brokers show options prices and expected moves at no extra cost. The real costs are commissions, the bid-ask spread and taxes on short-term gains.
What should you do after an earnings trade?
- The trade worked: take the exit you planned. Do not raise your target after the fact; P&G gave back 2.7% the day after its jump.
- The trade gapped against you: sell if the loss is beyond your plan or the thesis is broken. Do not add to it to get back to even.
- Nothing much happened: close it on your time exit. A trade with no catalyst left is a position you no longer have a reason to hold.
- Every time: log the expected move, the actual move and your result. After 20 to 30 trades, check whether your average return after costs is positive.
To compare earnings trading with other ways of following signals, read our guide to AI stock signals, or see every live trade, including the losers, on Earnings AI.
The bottom line: To trade earnings well, you have to beat what the market already priced in, not just predict a beat. Check the expected move from options, compare it with past reports, size for a gap your stop cannot prevent, and set your exits before you enter. Judge yourself on the average return per trade after costs, because a 72.8% win rate with losses 2.3 times the size of wins leaves only a thin edge.
Frequently asked questions
How do you trade earnings as a beginner?
Start with shares, not options, and keep each position small enough that a 20% overnight gap costs no more than 1% of your portfolio. Check the expected move from options prices, write a one-sentence thesis that includes guidance, and decide your exits before you enter. Track every result after costs.
Is it better to buy before or after earnings?
Neither is better in general. Buying before means betting on the report and accepting the gap. Buying after means you know the news, but research by Charles Martineau finds that in large stocks prices have absorbed earnings surprises on the announcement day since 2006, leaving little drift to capture afterward.
How do you calculate a stock's expected earnings move?
Add the prices of the at-the-money call and put for the first expiry after the report, then divide by the share price. The result is the move, in either direction, that options imply. Before P&G's October 22, 2026 report, options implied about 3%; the stock rose 5.5%.
Why did a stock fall after beating earnings?
Because the beat was already expected, or something else in the report disappointed, such as guidance, margins or the dividend. In Q3 2026, 84% of S&P 500 companies beat EPS estimates, so a beat alone is common. Walgreens beat estimates on January 4, 2024 but fell 5% after cutting its dividend.
Should I hold a stock through earnings?
If you own it for the long term and the position is a size you can live with after a large gap, holding is reasonable. If it is a large position or a short-term trade, consider trimming before the report. Decide before the report, not after the price has already moved.
What should I do if an earnings trade gaps against me?
Compare the loss with your plan. If the thesis is broken or the loss is beyond your limit, sell and accept it. Do not average down to get back to even. Then log the expected move and actual move, and check whether your position size was right for that gap.
Sources
- FactSet, John Butters, S&P 500 Earnings Season Update (Nov 6, 2026)
- CNBC, Procter & Gamble earnings beat as sales rise 4%, boosted by laundry and home products (Oct 22, 2026)
- Investing.com, Why is Procter & Gamble stock surging today? (Oct 22, 2026)
- Investing.com, Procter & Gamble shares may move 2.6% on Oct. 22 earnings (Bloomberg options data) (Oct 15, 2026)
- Cboe, market insight with P&G implied earnings move (Oct 21, 2026)
- Charles Martineau, Rest in Peace Post-Earnings Announcement Drift, Critical Finance Review (2022)
- CNBC, Walgreens stock plunges after drugstore chain slashes quarterly dividend nearly in half (Jan 4, 2024)
- US SEC, Investor.gov, Types of Orders (accessed Nov 7, 2026)
- Internal Revenue Service, Topic no. 409, Capital gains and losses (accessed Nov 7, 2026)
- Intrinio, US equity 15-minute price history (Oct 2026)
- TruthSayer AI, Earnings AI performance and trade list (Nov 7, 2026)
This article is for educational purposes only and is not investment advice. Past performance does not guarantee future results.
Bek Iigilikov
Bek brings a strategic, data-driven perspective to investment research, market intelligence, and portfolio growth at TruthSayer AI. He focuses on quantitative investment strategies, financial analytics, and U.S. equities, with an approach that emphasizes disciplined investing, transparency, and informed decision-making over speculation and hype.
