Some company’s earnings reports consistently produce large stock price changes in either a bullish or bearish direction after the earnings announcement.
The stock price movement for some of these companies exceed what the market makers are anticipating which presents a trading opportunity.
Delphian calls this strategy a Price Mover and based on historical analysis, the price swings can start 1-10 days before earnings.
NTES is an excellent example of a stock that makes major moves almost every earnings announcement.
A Price Mover is designed to capture a 15-30% gain for a long straddle; a long strangle could be used also.
The trade is designed to profit on a large rise or drop in price before or immediately after earnings.
The trade is closed when any of the following conditions are met: Profit target is met, stop-loss is met or the day after the earnings release.
Delphian's default price mover criterion involves a price change that is greater than or equal to a 3% move in either direction from earning’s day to 1 day after for at least 7 out of the last 10 earnings reports.
The screener will analyze all historical data and generate a qualifying list of stocks. The screener criterion can be customized to match an individual’s trading preferences.
Any of the fields shown below can be altered to the user’s preference.
Delphian created the Earnings Calendar so users can quickly screen and backtest symbols on one screen.
Symbols can be tested individually or as a group using the bulk testing feature.
All the trading strategy fields shown below are customizable to the user’s preferences.
Below are the results of a backtest of a long straddle strategy for Western Digital Corporation (WDC) over the last 10 earnings releases, based on entering a trade with the characteristics shown above.
Over the previous 10 earnings, the long straddle position produced a cumulative profit of $929 per contract with a profit factor of 7.07 and a win rate of 80%.
The chart below displays the individual trade results for the analysis on WDC performed above.
Price mover trades are fairly simple to execute however they are very difficult to find because market makers factor in the expected moves very accurately.
Always test the trade historically prior to executing a live trade to help prevent losses.
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