Swing Trade Earnings Bullish Momentum With Options in Thor Industries Inc
Thor Industries Inc (NYSE:THO) : Swing Trade Earnings Bullish Momentum With Options
Date Published: 2018-12-02
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
Even as the market has turned volatile, and bullish momentum pre-earnings trades have dried up, the tide will turn. Today we look at one such speculation, right now.THOR has earnings due out on 12-6-2018, before the market opens and 3-days before then would be Monday, 12-3-2018, near the close of trading.
The Short-term Option Swing Trade Ahead of Earnings in Thor Industries Inc
We will examine the outcome of going long a weekly call option in Thor Industries Inc just three trading 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 five-years in Thor Industries Inc:| THO: Long 40 Delta Call | |||
| % Wins: | 84.2% | ||
| Wins: 16 | Losses: 3 | ||
| % Return: | 291% | ||
Tap Here to See the Back-test
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).
Track this trade idea. Get alerted for ticker `THO` 3 days before earnings
Setting Expectations
While this strategy has an overall return of 291%, the trade details keep us in bounds with expectations:➡ The average percent return per trade was 22.4%.
➡ The average percent return per winning trade was 29.4%.
➡ The average percent return per losing trade was -15.1%.
Looking at More Recent History
We did a multi-year back-test above, now we can look at just the last year:
| THO: Long 40 Delta Call | |||
| % Wins: | 100% | ||
| Wins: 3 | Losses: 0 | ||
| % Return: | 155.3% | ||
Tap Here to See the Back-test
We're now looking at 155.3% returns, on 3 winning trades and 0 losing trades.
➡ The average percent return over the last year per trade was 53.79%.
WHAT HAPPENED
Pre-earnings windows tend to create optimism, in any market. his is how people profit from the option market, and Trade Machine gives you the capacity to trade beyond luck.Tap Here, See for Yourself
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.