Tesla Rallies After This Event -- And it Is AgainDate Published: 2018-04-04
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.
Tesla Inc has two types of earnings events -- one normal type -- there's a date, we all expect it, they report revenue and EPS numbers. But Tesla has a second type of event that requires a 8-K filing, and that is the end of quarter vehicle deliveries summary it reports.
It's this event that we track at Capital Market Laboratories, and it's this event that has seen a repeating pattern.
Tesla just released its vehicle delivery numbers one day ago -- it was a miss but relieved fears of catastrophe. That description could have been written for any of the prior four quarters, and it's because of that repetition, that a tradeable phenomenon has appeared.
Let's look at the results of buying an at the money call option in Tesla that is closest to 21-days from expiration but more than 20, but waiting until 4 days after it reports its delivery data. We consider that the earnings date, so here is the set-up, explicitly:
Since this is a naked long call position, we also added some risk protection, which is to say, we tested using a 50% stop and a 100% limit:
In English, at any time the call was either up 100% or down 50%, it was closed at that time.
Here are the results over the last three events in Tesla:
The mechanics of the TradeMachine™ are that it uses end of day prices for every back-test entry and exit (every trigger).
We see a 345% return, testing this over the last 3 vehicle delivery dates in Tesla. That's a total of just 48 days (16 days for each earnings date, over 3 earnings dates).
While this strategy had an overall return of 345%, the trade details keep us in bounds with expectations:
➡ The average percent return per trade was 99.7% per 16-day period.
There's a lot less luck to successful option trading than many people realize. We are after answers that are empirical, objective, and explicit in order to find repeatable strategies and patterns that produce successful trades over and over again. 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
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.