Adobe Systems Inc

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Trading Patterned Momentum in Tech Gem Adobe Systems Incorporated

Adobe Systems Incorporated (NASDAQ:ADBE) : Short-term Option Swing Trade Ahead of Earnings

Date Published:

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.

While 'FAANNG' (FB, AMZN, AAPL, NFLX, NVDA, GOOGL) gets all the press, it's likely time to change that acronym, yet again, to 'FAAANNG,' adding Adobe Systems Incorporated (NASDAQ:ADBE) to that list of tech gems. We can see, in the chart below, that the stock is up nearly 150% over the last 2-years.

Adobe's next earnings release is due out in the middle of March -- with the date yet to be confirmed, and the coming does report after the market loses. This is one we can put in a pin in, and get an alert when the time is right.

Track this trade idea. Get alerted for ticker `ADBE`  3 days before earnings



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We will examine the outcome of going long a weekly call option in Adobe Systems Incorporated just three trading days before earnings and selling the call one day before the actual news.

Of particular interest here is not just the wins and the big numbers that we've seen before, but it is in fact the results of the losing trades, and how well behaved the stock has been, even when it did not rise.

For those that like this type of strategy that has shown a well contained loss amount when the trades do lose, we highly encourage you to attend our free webinar coming 2-24-2018 by tapping this link: Discover Volatile Market Trading Results -- Become a master, and leave the fear behind.

This is construct of the trade, noting that the short-term trade closes before earnings and therefore does not take a position on the earnings result.

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.

Below we present the back-test stats over the last three-years in Adobe Systems Incorporated:

ADBE: Long 40 Delta Call

% Wins: 75%
Wins: 9 Losses: 3
% Return:  207.4% 

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).

Track this trade idea. Get alerted for ticker `ADBE`  3 days before earnings



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We see a 207.4% return, testing this over the last 12 earnings dates in Adobe Systems Incorporated. That's a total of just 27 days (3-day holding period for each earnings date, over 12 earnings dates).

This short-term trade hasn't won every time, and it won't, but it has been a winner 9 times and lost 3 times, for a 75% win-rate and again, that 207.4% return in less than one-full month of actual holding period.

Setting Expectations
While this strategy has an overall return of 207.4%, the trade details keep us in bounds with expectations:

      The average percent return per trade was 17.3% over three-days.
      The average percent return per winning trade was 26.4% over three-days.
      The average percent return per losing trade was a nicely contained -10% over three-days.

We found this trade using at the Trade Machine™ Pro scanner, looking at the Nasdaq 100 as our ticker group and the "3-days Pre-earnings Long Call."

And are some vetted results:

Looking at More Recent History
We did a multi-year back-test above, now we can look at just the last year:

ADBE: Long 40 Delta Call

% Wins: 75%
Wins: 3 Losses: 1
% Return:  53% 

Tap Here to See the Back-test

We're now looking at 53% returns, on 3 winning trades and 1 losing trades.

      The average percent return over the last year per trade was 12.5%.
      The average percent return per winning trade was 17.5% over three-days.
      The percent return for the losing trade was a nice and neat -2.5 over three-days.

Bull markets tend to create optimism, whether it's deserved or not. To see how to find the best performing historical momentum, technical analysis or non-directional trades for any stock using empirical results rather than guesses, we welcome you to watch this quick demonstration video:
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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.