Earnings Gap
The overnight price jump or drop a stock makes between the prior close and the open after an earnings report.
An earnings gap occurs when a company's after-hours or pre-market reaction to an earnings report creates a discontinuity between the prior day's close and the next regular session's open. The stock literally gaps — there is no continuous price path through the move.
Gaps created by earnings are different from technical gaps because they are fundamentally driven. They can be gap-and-go (continuation) or gap-and-fade (reversal) depending on how much of the news was already priced in.
Gaps are important for options traders: the implied volatility crush after earnings (IV collapses once the uncertainty resolves) can wipe out option premium even when the direction was right but the move was smaller than priced in.
Related Terms
After-Hours Trading
Stock trading that occurs after the official 4:00 PM ET close. Lower liquidity and wider spreads; major news like earnings often hits here.
IntermediateEarnings Beat
When a company reports EPS or revenue above the analyst consensus estimate. Often triggers a stock price increase.
BeginnerEarnings Miss
When a company reports EPS or revenue below the analyst consensus estimate. Typically triggers a sharp stock decline.
BeginnerEarnings Report
A company's official quarterly disclosure of revenue, earnings, margins, and guidance. The biggest recurring event in single-stock trading.
BeginnerEarnings Season
The 4–6 week window each quarter when most public companies report results. Runs approximately January, April, July, and October.
BeginnerMarket-on-Close (MOC) Order
A market order that executes in the official closing auction at the day's closing price. Used to guarantee a close print; large MOC imbalances can move price into the bell.
IntermediatePre-Market Trading
Trading before the 9:30 AM ET open, typically from 4:00 AM to 9:30 AM ET. Used to react to overnight news, data, and earnings.
Intermediate