Invitae Corporation (NYSE:NVTA) : A Pattern Emerges: It May be Time to Get Bullish on Invitae
Date Published: 2018-11-10
DisclaimerThe 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.
LEDEThere is a bullish momentum pattern in Invitae Corporation (NYSE:NVTA) that has been recent in its emergence. As the genomics company has started to make waves, Wall Street has noticed -- in a very specific time frame. Invitae released earnings on 11-7-2018, and five-days after that would be 11-12-2018.
You can read about those results in our news update here: Invitae Beats Earnings and Raises Estimates
Invitae Corporation (NYSE:NVTA) EarningsIn Invitae Corporation, for the last three earnings releases, starting five-days after the announcement and lasting for the next 25 days, the stock move has been impressively higher -- and owning a 50 delta (at the money) call has seen massive returns.
This back-test opens five-days after earnings were announced to try to find a stock that continues an upward trajectory after an earnings event.
Here is a relevant stock chart for NVTA, with the earnings dates marked with a "E" icon, and the bullish window that followed highlighted in yellow:
Simply owning options after earnings, blindly, is likely not a good trade, but hand-picking the times and the stocks to do it in can be useful. We can test this approach without bias with a custom option back-test. Here is the timing set-up around earnings:
Rules* Condition: Wait for five-days after earnings:
* Open the long at-the-money call five calendar days after earnings.
* Close the long call 30 calendar days after earnings.
* Use the options closest to 30 days from expiration (but more than 25 days).
This is a straight down the middle direction trade -- this trade wins if the stock is continues on an upward trajectory after a large earnings move the two-weeks following earnings and it will stand to lose if the stock does not rise. This is not a silver bullet -- it's a trade that needs to be carefully examined.
But, this is a conditional back-test, which is to say, it only Triggers if an event before it occurs.
RESULTSIf we bought the at-the-money call in Invitae Corporation (NYSE:NVTA) over the last year but only held it after earnings, we get these results:
The mechanics of the TradeMachine® are that it uses end of day prices for every back-test entry and exit (every trigger).
Looking at AveragesThe overall return was 188.4%.
Bullish momentum and sentiment after earnings can be quite powerful. Take a reasonable idea or hypothesis, test it, and apply lessons learned.
Tap Here, See for Yourself
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.