> Sadly earnings announcements have gotten a lot harder to trade on.
They're absolutely more difficult for reversion strategies, but if you're armed with more granular data of a high enough signal specific to the company you can do targeted trades very successfully.
Accurately forecasting the earnings results ahead of time on a per-equity basis requires more setup and data processing, but it is close to infallible when it comes to profiting on outperforms. Collect ultra-specified "alternative" data on individual companies with optimistic or pessimistic analyst forecasts, analyze it, then take a contrarian position if the data predicts an unexpected earnings result. This fails is in the case of extremely uninformed sentiment in the opposite direction of your own position (likely by unsophisticated investors not interpreting the results "correctly" en masse and opting for hype instead). But you can establish a win rate with a positive cushion.
One of the interesting things I've also done is collecting this data and using it beyond discretionary earnings trades. For example, by selling option premium for equities with very high theta, conversely stable revenue as forecasted by the data and low overall sentiment activity in the market. This is harder to pull off but it allows you to conduct a greater number of trades on a rolling basis through the quarter.
They're absolutely more difficult for reversion strategies, but if you're armed with more granular data of a high enough signal specific to the company you can do targeted trades very successfully.
Accurately forecasting the earnings results ahead of time on a per-equity basis requires more setup and data processing, but it is close to infallible when it comes to profiting on outperforms. Collect ultra-specified "alternative" data on individual companies with optimistic or pessimistic analyst forecasts, analyze it, then take a contrarian position if the data predicts an unexpected earnings result. This fails is in the case of extremely uninformed sentiment in the opposite direction of your own position (likely by unsophisticated investors not interpreting the results "correctly" en masse and opting for hype instead). But you can establish a win rate with a positive cushion.
One of the interesting things I've also done is collecting this data and using it beyond discretionary earnings trades. For example, by selling option premium for equities with very high theta, conversely stable revenue as forecasted by the data and low overall sentiment activity in the market. This is harder to pull off but it allows you to conduct a greater number of trades on a rolling basis through the quarter.