Howard Hughes Corporation (The) (NYSE:HHC) : The Bullish Technical TTM Squeeze With OptionsDate Published: 2017-11-6
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.
This is one of the those remarkable few times where in the midst of a bull market we can see that Howard Hughes Corporation (The) (NYSE:HHC) stock is actually down -15.85% over the last 3 years. Yet, in that same time frame, using a bullish technical signal on a stock that has dropped has actually shown substantial positive historical returns of 190.4% in the face of a stock down trend.
This is a technical analysis triggered momentum trade that bets on a bullish move in the underlying stock for a period that starts one-day after Howard Hughes Corporation (The) (NYSE:HHC) triggers a breakout from the TTM Squeeze signal and lasts until two-days in a row show reversed (bearish) momentum. It has been a winner for the last 3 years. We note the use of strict risk controls in this analysis.
Howard Hughes Corporation (The) (NYSE:HHC) TTM Squeeze Technical Trigger
The idea is simple -- stocks tend to move in tight ranges for the majority of the time, and then they move in bursts for the remaining periods. The breakout from the TTM Squeeze attempts to find these bursts.
* Open the long 50 delta call one day after the TTM Squeeze has been broken with upside momentum.
* Close the call after that signal has seen a consecutive two-day reversal.
* Use the options closest to 30 days from expiration.
* Never trade earnings -- irrespective of the technical indicator, this trade will close 2-days before a scheduled earnings announcement.
This is a straight down the middle bullish bet -- this trade wins if the stock rises and will lose if the stock does not.
Since owning at the money options is an aggressive directional bet, we test this approach with added risk limiting parameters, namely, the back-test uses a 40% stop loss and a 40% limit gain.
This also has the benefit of taking profits early, before the bullish signal ends -- that is, before two consecutive reversal days appear.
Owning the 50-delta call in Howard Hughes Corporation (The) (NYSE:HHC) over the last three-years but only held it after a TTM Squeeze was triggered we get these results:
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 190.4% back-test return, which is based on 8 trades in Howard Hughes Corporation (The). A bullish breakout from the TTM Squeeze is a technical signal that doesn't happen often, but rather is designed to mechanically identify the times when a stock is in a low volatility period and may be about to thrust higher. It's a signal based on probabilities, not absolutes, so it won't work all the time.
Looking at Averages
The overall return was 190.4%; but the trade statistics tell us more with average trade results:
➡ The average return per trade was 23.61%.
➡ The average return per winning trade was 46.26%.
➡ The average return per losing trade was -14.14%.
For the details about the TTM Squeeze, how it works, when it's triggered and what it means, you can read our dossier The details behind the TTM Squeeze Technical Indicator .
This is one way people profit from the option market. Take a reasonable idea or hypothesis, test it, and apply lessons learned.
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.