Stock Option Backtester Twitter (NYSE:TWTR) : The Exact Bearish Trigger
Date Published: 2019-03-08
DisclaimerThe results here are provided for general informational purposes from the CMLviz Trade Machine Stock Option Backtester as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation.
PrefaceToday we look at short-term bearish trigger in Twitter that has fired several times in the last month and has shown positive results over the short-term and the last several years.
The goal is to build a portfolio of option set-ups, diversified not just by ticker, but by strategy. It's in this process that we identify the times were short bursts of risk exposure have been profitable in the past.
With that, we build a portfolio of alerts. Here is a selection of recent insights.
* 'Not Bearish' Trigger in Amazon (AMZN).
* Bullish Trigger in Microsoft (MSFT).
* Bullish Trigger in Lam Research (LRCX).
* Bullish Trigger in Apple (AAPL).
* Bullish Trigger in Roku (ROKU).
* 'Not Bearish' Trigger in Google (GOOGL).
* Bullish Trigger in Shopify (SHOP).
* Bullish Trigger in Palo Alto Networks (PANW).
* Bullish Trigger in Google (GOOGL).
* Bearish Trigger in Twitter (TWTR).
* Bearish Trigger in Micron (MU).
* Bullish Trigger in Microsoft (MSFT).
* Bearish Trigger in Alibaba (BABA).
* Bearish Trigger in Nvidia (NVDA).
* Bullish Trigger in Nvidia (NVDA).
* Bearish Trigger in Netflix (NFLX).
* Bullish Trigger in Amazon (AMZN).
The Short-term Bearish Option Trade in TwitterThis is an active trigger and has fired 3 times in the 30 days from 2019-02-07 to 2019-03-08, each for one-day trade wins. Before we even get into the details, here are the results for that period:
The Option Backtest SetupWe will examine the outcome of going long an out-of-the-money (using 40 delta to identify the strike price) put, in options that are the closest to 14-days from expiration. But we follow three rules:
* Never Trade Earnings
We enter the long put.
That means the trigger waits until two days after earnings to even start a scan and closes any positions two-days before earnings -- that is the definition of "never trade earnings" for Trade Machine -- a four-day window around the event that is "hands off."
* Use a technical trigger to start the trade, if and only if these specific items are met. As of this writing, the conditions are not satisfied.
Wait until the day that the stock price crosses below the 10-day moving average and the stock is already below the 200-day moving average while making sure the RSI (using 20 days) is above 40. Here is a nice simple image of the technical requirement:
* Finally, we set a stop and a limit:
* Use a 20% limit and a 40% stop.
At the end of each day, the back-tester checks to see if the long put is up 20% or down 40%. If it is, it closes the position.
RESULTS FROM THE OPTION BACKTESTERHere are the results over the last three-years in Twitter:
The mechanics of the TradeMachine® Stock Option Backtester are that it uses end of day prices for every back-test entry and exit (every trigger).
Checking the Moving AverageYou can check moving averages for TWTR on the Pivot Points tab on www.CMLviz.com.
MORE RESULTSHere are the results over the last year in Twitter:
As the stock has dipped 13.6% over the last year, the bearish trigger with options shows a 179% return.
WHAT HAPPENED: Option BacktesterBe empirical. Stop guessing. Tap here to try it 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.