Post-Earnings Drift (PEAD) & Momentum
What is post-earnings announcement drift?
Post-earnings announcement drift (PEAD) is the tendency for stocks to continue moving in the direction of their initial earnings reaction over the following days or weeks.
- Positive surprise → gap up → continued upside drift.
- Negative surprise → gap down → continued downside drift.
- The drift isn’t guaranteed, but it shows up statistically for many names and regimes.
Key difference from IV trades: PEAD trades focus on directional price momentum
after the event, not on volatility before/after the print.
Why drift can happen
- Slow digestion of new information by institutions and analysts.
- Positioning and flows: shorts covering or longs adding over several sessions.
- Guidance and narrative shifts that trigger multi-day re-pricing.
How EarningsWatcher’s DriftLab helps
DriftLab is built specifically to quantify post-earnings behavior:
- Shows short- and long-term drift stats for each ticker.
- Matches the current move/run to historical patterns.
- Flags cases where continuation has been common vs rare.
Basic post-earnings “runner” play
A simple PEAD approach:
- Wait for earnings to drop and the initial move to print.
- Use DriftLab to check how this ticker usually behaves after similar moves.
- If continuation is common, look for clean technical structure and liquidity, then build a directional options play.
Common structures for runners
- Calls or puts a few weeks out, slightly OTM or ATM.
- Debit spreads (call spreads / put spreads) to cap cost and soften IV moves.
- Small, repeatable positions instead of all-in gambles on one ticker.
Advantages vs pre-earnings trades
- You avoid the worst of IV crush because you enter after the print.
- You trade in the direction of realized information (good/bad report, guidance, reaction).
- It can be less random than betting on the initial move itself.
Risks and things to watch
- Some moves mean-revert quickly; not every gap becomes a multi-day run.
- Liquidity and spreads can still be tricky right after earnings.
- Chasing extended moves late in the run can lead to buying the top or selling the bottom.
Combining PEAD with volatility tools: you can use Moves Analyser and DriftLab together to find
tickers that both move a lot on earnings and tend to trend afterwards.
Putting it together in a process
- Use the earnings calendar to track recent and upcoming reports.
- Each morning after big releases, scan for large movers with volume.
- Open DriftLab on those names and check historical post-earnings behavior.
- If the stats and structure line up, express the idea with a defined-risk options play.
Want to combine pre-earnings and post-earnings setups?