Weekend Swing Trade Ahead of Earnings in Intuit Inc
Intuit Inc (NASDAQ:INTU) : Weekend Swing Trade Ahead of Earnings
Date Published: 2018-05-18Disclaimer
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
There is a pattern of bullish momentum in Intuit Inc (NASDAQ:INTU) stock just two-days before earnings.
This is a short-term swing trade, it won't be a winner forever, and it can be easily derailed by a couple of down days in the market irrespective of Intuit Inc news, but for now it has shown a repeating success that has not only returned 262% over the last eight pre-earnings sessions, but has also shown a win-rate of 87.5%.
Intuit has earnings due out on 5-22-2018 after the market closes, and two-trading days before then would be Friday 5-18-2018 near the market close (just before the weekend).
IDEA
The idea is quite simple -- trying to take advantage of a pattern in short-term bullishness just before earnings, and then getting out of the way so no actual earnings risk is taken.
We will examine the outcome of going long a monthly call option in Intuit Inc just two trading days before earnings and selling the call on the day of earnings. But, since INTU reports after the close, this 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 Intuit Inc:
| INTU: Long 40 Delta Call | |||
| % Wins: | 87.5% | ||
| Wins: 7 | Losses: 1 | ||
| % Return: | 262% | ||
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 `INTU` 2 days before earnings
The trade will lose sometimes, and since it is such a short-term position, it can lose from news that moves the whole market that has nothing to do with Intuit Inc, but over the recent history, this bullish option trade has won ahead of earnings.
Setting Expectations
While this strategy has an overall return of 262%, the trade details keep us in bounds with expectations:
➡ The average percent return per trade was 36%.
WHAT HAPPENED
There's a lot less luck to successful option trading than most people realize and this is it -- this is how people profit from the option market.
To find the best performing historical momentum, technical analysis or non-directional trades 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.