PREFACE
There is a pattern of bullish momentum in Stanley Black & Decker Inc (NYSE:SWK) 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 Stanley Black & Decker Inc news, but for now it has shown a repeating success that has not only returned 3,194% annualized returns, but has also shown a win-rate of 58%.

IDEA
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 Stanley Black & Decker Inc.

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The Short-term Option Swing Trade Ahead of Earnings in Stanley Black & Decker Inc
We will examine the outcome of going long a weekly call option in Stanley Black & Decker 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 three-years in Stanley Black & Decker Inc:

SWK: Long 40 Delta Call

% Wins: 58%
Wins: 7 Losses: 5
% Return:  210% 
% Annualized:  3,194% 

Tap Here to See the Back-test

The mechanics of the TradeMachine™ are that it uses end of day prices for every back-test entry and exit (every trigger).



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We see a 210% return, testing this over the last 12 earnings dates in Stanley Black & Decker Inc. That's a total of just 24 days (2-day holding period for each earnings date, over 12 earnings dates). That's an annualized rate of 3,194%. 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 7 times and lost 5 times, for a 58% win-rate and again, that 210% return in less than one-full month of actual holding period.

Setting Expectations
While this strategy has an overall return of 210%, the trade details keep us in bounds with expectations:
      The average percent return per trade was 15.4%.


Looking at More Recent History
We did a multi-year back-test above, now we can look at just the last year:

SWK: Long 40 Delta Call

% Wins: 75%
Wins: 3 Losses: 1
% Return:  56.6% 
% Annualized:  2,582% 

Tap Here to See the Back-test

We're now looking at 56.6% returns, on 3 winning trades and 1 losing trades.
      The average percent return over the last year per trade was 17.04%.

WHAT HAPPENED
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 Stanley Black & Decker Inc. To see how to test this for any stock we welcome you to watch the demonstration video.