Quarterly Results Trading Strategy

Earnings season in the stock market is a lot like a T20 cricket match — full of energy, surprises, and sudden momentum shifts. And that’s why it becomes extremely important to prepare with the proven quarterly results trading strategy.

Wondering why?

Well, earning seasons can reap you higher profits, but only when you plan it and apply it with a proper plan in the live market.

In this blog, we will cover the strategy and also tips that can help you in making a better trade decision.

Quarterly Results Trading Strategy Explained

Quarterly results are when companies reveal their scorecard — revenue, profit, margins, guidance. The reaction to these numbers depends mainly on:

• Expectations vs. Reality – Beat the Street and prices can jump; miss slightly and they might tank.
• Market Sentiment – In a bullish market, even average numbers get a warm welcome. In a bearish one, great results can still get sold off.

If you want to trade in stock options based on quarterly results, then here are 3 ways that won’t disappoint you.

1. The Pre-Result Position – Riding the Anticipation

Positioning before results are announced aims to benefit from volatility rather than guessing numbers. To maximize profits during such events learn how to create long straddle in options buying.

Best Conditions:

• Implied Volatility (IV) is low compared to historical levels.
• The stock has a history of sharp moves post-results.

Example:
July 2023 – Axis Bank: IV was low before earnings. Buying an ATM straddle at ₹18 doubled to ₹36 the next morning when the stock gapped 5%.

Case Study – NIFTY (July 25, 2023):

• Event: Infosys & Reliance results in the same week.
• Setup: Bought NIFTY 19800 straddle (same week expiry) at ₹140 on July 24.
• Outcome: Gap down of 90 points on July 25; straddle rose to ₹215 in 20 minutes.
• Exit: Closed at ₹210 before lunch — around 50% gain.
• Lesson: Pre-result plays need fast exits once volatility is realised.

2. The Reaction Trade – Catching the First Wave

This approach trades right after the numbers are released, aiming to capture the immediate move.

Best Conditions:

• Earnings beat/miss is clear.
• A major technical level is broken.

Example:
Infosys issued weak guidance and broke a strong support level. Shorts entered within 15 minutes rode a 4% drop before market close.

Case Study – BANKNIFTY (Jan 23, 2024):

• Event: HDFC Bank Q3 numbers fell short of expectations.
• First Candle: Broke 46,000 support with heavy selling volume.
• Trade: Shorted 45800 PE at ₹220 at 9:25 AM.
• Exit: Covered at ₹360 by 10:40 AM — ₹140 per lot profit.
• Lesson: Reaction trades require speed and conviction.

3. The Fade – Selling the Overreaction

Often, the first reaction to results is exaggerated, and fading that move can be profitable.

Best Conditions:

• Stock gaps up/down 6–10% early in the day.
• Historical data shows a tendency to reverse intraday or the next day.

Example:
Jan 2024 – A mid-cap IT stock spiked 8% in the morning after “record profits”. By close, gains cooled to 3%. Next day, the price was flat.

Case Study – NIFTY (Oct 19, 2023):

• Event: Reliance results led to a 120-point gap-up at open.
• Observation: No follow-up buying after the first hour; call OI dropped sharply.
• Trade: Shorted NIFTY 19600 CE at ₹118 at 10:45 AM.
• Exit: Covered at ₹62 by close.
• Lesson: If momentum dies after an initial spike, the fade can be a low-risk play.

Mistakes to Avoid in Quarterly Result Trading Strategy

Every strategy comes with risk, and controlling it is based on the action you take. To avoid losses, follow tips below:

• Over-Leveraging – Going too heavy on one trade.
• Ignoring IV Crush – Options premiums can collapse post-results even if the direction is correct.
• Changing Plans Mid-Trade – Letting greed turn a winner into a loser.

Backtesting Options Trading Strategies

Now, to get better results and more confidence while trading options, go back 8–10 quarters for the target stock and test:

• What happens after a beat?
• Does it trend or reverse?
• How does the move compare to IV levels?

This preparation shifts trading from guesswork to probability-based decisions.

Conclusion

Quarterly results trading offers volatility and big intraday moves. Without a tested approach, it can also be unforgiving.

Key points:

• Know if the position is pre-result, reaction-based, or a fade.
• Manage position size carefully.
• Respect volatility — it’s both the opportunity and the risk.

Earnings season comes four times a year. The goal is consistent survival and growth over multiple seasons rather than chasing one-off wins.

Want to master the quarterly result trading strategy with live market guidance? Join our Option Trading Mentorship now.