Marriott International, MAR, earnings, option, bullish
Disclaimer
The results here are provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation.
Preface
We visited this pre-earnings momentum in Marriott last earnings cycle and it did repeat its pattern. Today we look to it again, but with a slight adjustment that has made a large improvement for a very specific reason.
There is a bullish momentum pattern in Marriott International (NASDAQ:MAR) stock 7 calendar days before earnings, and we can capture that phenomenon explicitly by looking at returns in the option market. But this time, we look at a back-test that closes on the day of earnings -- right before the announcement, rather than our standard one full day buffer.
It turns out that the one-day before earnings also has its own momentum pattern and including that extra day in the back-test does yield higher returns and win rates. So, in this case, we are looking at a sort of double trend.
According to our earnings date provider, Wall Street Horizon, Marriott next reports earnings on 11-7-2017 after the market closes. 7-days before then would be 10-31-217.
LOGIC
The logic behind the test is easy to understand -- in a bull market there can be a stock rise ahead of earnings on optimism, or upward momentum, that sets in the one-week before an earnings date.
The Bullish Option Trade Before Earnings in Marriott International
We will examine the outcome of getting long a weekly 40 delta call option in Marriott International 7-days before earnings (using calendar days) and selling the call before the earnings announcement -- on the day of earnings. Since MAR reports after the close, this back-test still does not take earnings risk.
Here's the set-up in great clarity; again, note that the trade closes before earnings, so this trade does not make a bet on the earnings result.
RISK MANAGEMENT
We can add another layer of risk management to the back-test by instituting and 40% stop loss and a 40% limit gain. Here is that setting:
In English, at the close of each trading day we check to see if the long option is either up or down 40% relative to the open price. If it was, the trade was closed.
DISCOVERY
We found this back-test by looking at the NASDAQ 100 and scanning for the 7-day pre-earnings long call back-test in the Trade Machine Pro Scanner.
When looking over the last 2-years, just five companies in the index have a win rate of 87.5% or higher:
RESULTS
Here are the results over the last three-years in Marriott International:
Tap Here to See the Back-test
The mechanics of the TradeMachine™ are that it uses end of day prices for every back-test entry and exit (every trigger).
We see a 1,039% return, testing this over the last 12 earnings dates in Marriott International. That's a total of just 84 days (7-days for each earnings date, over 12 earnings dates). This has been the results of following the trend of bullish sentiment into earnings while avoiding the actual earnings result.
We can also see that this strategy hasn't been a winner all the time, rather it has won 11 times and lost once, for a 91.7% win-rate.
Setting Expectations
While this strategy had an overall return of 1,039%, the trade details keep us in bounds with expectations:
➡ The average percent return per trade was 59.5% over each seven day period.
➡ The average percent return per trade was 68.8% over each seven day period.
➡ The percent return for the losing trade was -43.8% over a seven day period.
It's easy to miss, but this is a risky back-test, and even that one loss reveals that reality. A 44% loss in seven days serious risk.
Back-testing More Time Periods in Marriott International
Now we can look at just the last year as well:
We're now looking at 362% returns, on 4 winning trades and 0 losing trades.
➡ The average percent return over the last year per trade was 74.9% over each seven day period..
WHAT HAPPENED
Bull markets tend to create optimism, whether it's deserved or not. To see how to test this for any stock we welcome you to watch this quick demonstration video:
Tap Here to See the Tools at Work
Risk Disclosure
You should read the Characteristics and Risks of Standardized Options.
Past performance is not an indication of future results.
Trading futures and options involves the risk of loss. Please consider carefully whether futures or options are appropriate to your financial situation. Only risk capital should be used when trading futures or options. Investors could lose more than their initial investment.
Past results are not necessarily indicative of future results. The risk of loss in trading can be substantial, carefully consider the inherent risks of such an investment in light of your financial condition.
Please note that the executions and other statistics in this article are hypothetical, and do not reflect the impact, if any, of certain market factors such as liquidity and slippage.
The One-Week Pre-earnings Momentum in Marriott International
Marriott International (NASDAQ:MAR) : The One-Week Pre-earnings Momentum Trade With Options
Date Published: 2017-10-26Disclaimer
The results here are provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation.
Preface
We visited this pre-earnings momentum in Marriott last earnings cycle and it did repeat its pattern. Today we look to it again, but with a slight adjustment that has made a large improvement for a very specific reason.
There is a bullish momentum pattern in Marriott International (NASDAQ:MAR) stock 7 calendar days before earnings, and we can capture that phenomenon explicitly by looking at returns in the option market. But this time, we look at a back-test that closes on the day of earnings -- right before the announcement, rather than our standard one full day buffer.
It turns out that the one-day before earnings also has its own momentum pattern and including that extra day in the back-test does yield higher returns and win rates. So, in this case, we are looking at a sort of double trend.
According to our earnings date provider, Wall Street Horizon, Marriott next reports earnings on 11-7-2017 after the market closes. 7-days before then would be 10-31-217.
LOGIC
The logic behind the test is easy to understand -- in a bull market there can be a stock rise ahead of earnings on optimism, or upward momentum, that sets in the one-week before an earnings date.
The Bullish Option Trade Before Earnings in Marriott International
We will examine the outcome of getting long a weekly 40 delta call option in Marriott International 7-days before earnings (using calendar days) and selling the call before the earnings announcement -- on the day of earnings. Since MAR reports after the close, this back-test still does not take earnings risk.
Here's the set-up in great clarity; again, note that the trade closes before earnings, so this trade does not make a bet on the earnings result.
RISK MANAGEMENT
We can add another layer of risk management to the back-test by instituting and 40% stop loss and a 40% limit gain. Here is that setting:
In English, at the close of each trading day we check to see if the long option is either up or down 40% relative to the open price. If it was, the trade was closed.
DISCOVERY
We found this back-test by looking at the NASDAQ 100 and scanning for the 7-day pre-earnings long call back-test in the Trade Machine Pro Scanner.
When looking over the last 2-years, just five companies in the index have a win rate of 87.5% or higher:
RESULTS
Here are the results over the last three-years in Marriott International:
| MAR: Long 40 Delta Call | |||
| % Wins: | 92% | ||
| Wins: 11 | Losses: 1 | ||
| % Return: | 1039% | ||
Tap Here to See the Back-test
The mechanics of the TradeMachine™ are that it uses end of day prices for every back-test entry and exit (every trigger).
We see a 1,039% return, testing this over the last 12 earnings dates in Marriott International. That's a total of just 84 days (7-days for each earnings date, over 12 earnings dates). This has been the results of following the trend of bullish sentiment into earnings while avoiding the actual earnings result.
We can also see that this strategy hasn't been a winner all the time, rather it has won 11 times and lost once, for a 91.7% win-rate.
Setting Expectations
While this strategy had an overall return of 1,039%, the trade details keep us in bounds with expectations:
➡ The average percent return per trade was 59.5% over each seven day period.
➡ The average percent return per trade was 68.8% over each seven day period.
➡ The percent return for the losing trade was -43.8% over a seven day period.
It's easy to miss, but this is a risky back-test, and even that one loss reveals that reality. A 44% loss in seven days serious risk.
Back-testing More Time Periods in Marriott International
Now we can look at just the last year as well:
We're now looking at 362% returns, on 4 winning trades and 0 losing trades.
➡ The average percent return over the last year per trade was 74.9% over each seven day period..
WHAT HAPPENED
Bull markets tend to create optimism, whether it's deserved or not. To see how to test this for any stock we welcome you to watch this quick demonstration video:
Tap Here to See the Tools at Work
Risk Disclosure
You should read the Characteristics and Risks of Standardized Options.
Past performance is not an indication of future results.
Trading futures and options involves the risk of loss. Please consider carefully whether futures or options are appropriate to your financial situation. Only risk capital should be used when trading futures or options. Investors could lose more than their initial investment.
Past results are not necessarily indicative of future results. The risk of loss in trading can be substantial, carefully consider the inherent risks of such an investment in light of your financial condition.
Please note that the executions and other statistics in this article are hypothetical, and do not reflect the impact, if any, of certain market factors such as liquidity and slippage.