Avoid Bear Market Risk: The Secret to Option Trading Before Earnings in Urstadt Biddle Properties Inc

Urstadt Biddle Properties Inc (NYSE:UBA) : Avoid Bear Market Risk: The Secret to Option Trading Before Earnings

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With the market's direction becoming tenuous, we can explore option trading opportunities in Urstadt Biddle Properties Inc (NYSE:UBA) that do not rely on stock direction. It turns out, over the long-run, for stocks with certain tendencies like Urstadt Biddle Properties Inc, there is a clever way to trade market anxiety or market optimism before earnings announcements with options.

This approach has returned 20.2% with a total holding period of just 55 days, or an annualized rate of 134.1%. Now that's worth looking into.

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The Trade Before Earnings
What a trader wants to do is to see the results of buying an at the money straddle a few days before earnings, and then sell that straddle just before earnings.

This trade is not a panacea, which is to say, we have to test it, stock by stock, to see when and why it worked. We start with Urstadt Biddle Properties Inc.

Here is the setup:

We are testing opening the position 6 calendar days before earnings and then closing the position 1 day before earnings. This is not making any earnings bet. This is not making any stock direction bet.

Once we apply that simple rule to our back-test, we run it on an at-the-money straddle:

If we did this long at-the-money (also called '50-delta') straddle in Urstadt Biddle Properties Inc (NYSE:UBA) over the last three-years but only held it before earnings we get these results:

Long At-the-Money Straddle

% Wins: 45.45%
Wins: 5 Losses: 6
% Return:  20.2% 
% Annualized:  134.1% 

We see a 20.2% return, testing this over the last 11 earnings dates in Urstadt Biddle Properties Inc. That's a total of just 55 days (5 days for each earnings date, over 11 earnings dates). That's an annualized rate of 134.1%.

We can also see that this strategy hasn't been a winner all the time, rather it has won 5 times and lost 6 times, for a 45% win-rate and again, that 20.2% return in less than two-full months of trading.

We note that the CML Trade Machine Pro back-tester will soon have a scanner on top of the back-testing power which can search for any strategy, but in particular this one -- a non-earnings, non-stock direction, short-term bet with limited downside.

Here is a 1-minute and 25-second video that shows you exactly how to do this for any stock and what every professional option trader would rather that you don't see.

Learn more here: Try the Back-tester Yourself

Setting Expectations
While this strategy has an overall return of 20.2%, the trade details keep us in bounds with expectations:
      The average percent return per trade was 26.89%.

This is it -- this is how people profit from the option market -- finding trading opportunities that avoid earnings risk and work equally well during a bull or bear market.