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Delta Air Lines Inc, DAL, earnings, return, short-term, trade
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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
Delta Air Lines Inc (NYSE:DAL) is not a tech stock, not a momentum stock, hardly considered a 'trading stock,' but it turns out, of all the companies out there, it has had a remarkable pattern of pre-earnings short term momentum. Let's look an airline this time.
Here is the one-year daily stock chart for Delta, with the earnings icons noted in green.
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For each of the last 4-earnings cycles, the four-days before earnings has seen remarkable bullish optimism. And, if we look further, over the last two-years, we see a similarly abrupt pattern.
Delta doesn't have earnings due until early April, so this would a time for an alert to revisit this back-test, but it's worth noting now, before the momentum tech stocks get all the attention.
The Short-term Option Swing Trade Ahead of Earnings in Delta Air Lines Inc
We will examine the outcome of going long a weekly call option in Delta Air Lines Inc just four calendar days before earnings and selling the call one day before the actual news.
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.
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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:
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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.
RESULTS
Below we present the back-test stats over the last two-years in Delta Air Lines Inc:
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).
This short-term trade hasn't won every time, and it won't, but it has been a winner 7 times and lost 1 time
Setting Expectations
While this strategy has an overall return of 414%, the trade details keep us in bounds with expectations:
➡ The average percent return per trade was 62.3% over each four-day period.
➡ The average percent return per winning trade was 78.9% over each four-day period.
➡ The percent return per trade was -54% over that four-day period. So note that the one loss was pretty large.
Looking at More Recent History
We did a multi-year back-test above, now we can look at just the last year:
➡ The average percent return over the last year per trade was 50.3% over each separate 4-day period.
Trade Discovery
We found this back-test result by using the Trade Machine Pro™ scanner. We looked at the S&P 500 and started with the "3-days Pre-earnings Long Call Back-test" and then adjusted the days before to 4 (rather than 3).
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And we saw these results:
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Is This Just Because Of a Bull Market?
This phenomenon of pre-earnings optimism also worked very well during 2007-2008, when the S&P 500 collapsed into the "Great Recession."
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The average return for this strategy using a full week (7 days) before earnings, by stock, using the constituents of the Nasdaq 100 and Dow 30 as the study group, saw a 45.3% return over those 2-years. And, of course, these are just 8 trades per stock, each lasting 7 days.
* Yes. We are empirical.
WHAT HAPPENED
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:
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.
Swing Trade Earnings Bullish Momentum With Options in Delta Air Lines Inc
Delta Air Lines Inc (NYSE:DAL) : Swing Trade Earnings Bullish Momentum With Options
Date Published: 2018-03-11Disclaimer
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
Delta Air Lines Inc (NYSE:DAL) is not a tech stock, not a momentum stock, hardly considered a 'trading stock,' but it turns out, of all the companies out there, it has had a remarkable pattern of pre-earnings short term momentum. Let's look an airline this time.
Here is the one-year daily stock chart for Delta, with the earnings icons noted in green.
For each of the last 4-earnings cycles, the four-days before earnings has seen remarkable bullish optimism. And, if we look further, over the last two-years, we see a similarly abrupt pattern.
Delta doesn't have earnings due until early April, so this would a time for an alert to revisit this back-test, but it's worth noting now, before the momentum tech stocks get all the attention.
The Short-term Option Swing Trade Ahead of Earnings in Delta Air Lines Inc
We will examine the outcome of going long a weekly call option in Delta Air Lines Inc just four calendar days before earnings and selling the call one day before the actual news.
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.
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.
RESULTS
Below we present the back-test stats over the last two-years in Delta Air Lines Inc:
| DAL: Long 40 Delta Call | |||
| % Wins: | 87.5% | ||
| Wins: 7 | Losses: 1 | ||
| % Return: | 414% | ||
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 `DAL` 4 days before earnings
This short-term trade hasn't won every time, and it won't, but it has been a winner 7 times and lost 1 time
Setting Expectations
While this strategy has an overall return of 414%, the trade details keep us in bounds with expectations:
➡ The average percent return per trade was 62.3% over each four-day period.
➡ The average percent return per winning trade was 78.9% over each four-day period.
➡ The percent return per trade was -54% over that four-day period. So note that the one loss was pretty large.
Looking at More Recent History
We did a multi-year back-test above, now we can look at just the last year:
➡ The average percent return over the last year per trade was 50.3% over each separate 4-day period.
Trade Discovery
We found this back-test result by using the Trade Machine Pro™ scanner. We looked at the S&P 500 and started with the "3-days Pre-earnings Long Call Back-test" and then adjusted the days before to 4 (rather than 3).
And we saw these results:
Is This Just Because Of a Bull Market?
This phenomenon of pre-earnings optimism also worked very well during 2007-2008, when the S&P 500 collapsed into the "Great Recession."
The average return for this strategy using a full week (7 days) before earnings, by stock, using the constituents of the Nasdaq 100 and Dow 30 as the study group, saw a 45.3% return over those 2-years. And, of course, these are just 8 trades per stock, each lasting 7 days.
* Yes. We are empirical.
WHAT HAPPENED
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:
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.