Ciena Corporation (NYSE:CIEN) : Swing Trading Earnings Bullish Momentum With OptionsDate Published: 2017-08-11
There is a pattern of bullish momentum in Ciena Corporation (NYSE:CIEN) stock just days before earnings, and we can track that by looking at swing returns in the option market. 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 Ciena Corporation news, but for now it has shown a repeating success that has not only returned 1,645% annualized returns, but has also shown a win-rate of 63%.
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. Now we can see it in Ciena Corporation.
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The Short-term Option Swing Trade Ahead of Earnings in Ciena Corporation
We will examine the outcome of going long a monthly call option in Ciena Corporation just three calendar 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.
Often times we look at option set-ups that are longer-term, and take no directional bet -- this is not one of those times. This is a no hold barred short-term bullish swing trade with options and that's it. It's a bullish bet, so must be conscious of the delta risk.
Below we present the back-test stats over the last two-years in Ciena Corporation:
We see a 72.1% return, testing this over the last 8 earnings dates in Ciena Corporation. That's a total of just 16 days (2-day holding period for each earnings date, over 8 earnings dates). That's an annualized rate of 1,645%. That's the power of following the short-term pattern of bullishness ahead earnings -- and not taking on the actual risk from the earnings outcome.
This short-term trade hasn't won every time, and it won't, but it has been a winner 5 times and lost 3 times, for a 63% win-rate and again, that 72.1% return in less than one-full month of actual holding period.
While this strategy has an overall return of 72.1%, the trade details keep us in bounds with expectations:
➡ The average percent return per trade was 14.18%.
Looking at More Recent History
We did a multi-year back-test above, now we can look at just the last year:
We're now looking at 108% returns, on 3 winning trades and 1 losing trades.
➡ The average percent return over the last year per trade was 28.51%.
The pattern of this bull market reveals a bullish run up before earnings in the very short-term -- independent of the realized earnings result. This has been a tradable phenomenon in Ciena Corporation. To see how to test this for any stock we welcome you to watch the demonstration video.