Ride-the-Wave Strategy (Straight Calls/Puts)
Ride-the-Wave targets multi-day price momentum following a company’s earnings announcement (EA). With this strategy:
1. Buy a stock one day post-EA if a stock reacts positively post-earnings:
- Near the close of trading the EA-day for a pre-market-EA
- Near the close of the following day for a post-market-EA
2. Sell-to-close after 7-10 days, or possibly earlier if a desired price target is reached
Similarly,
1. Short a stock one day post-EA if a stock reacts negatively post-earnings:
- near the close of trading the EA-day for a premarket-EA
- near the close of the following day for a post-market-EA
2. Stocks exhibiting negative post-EA price moves are sell/short-candidates The screen includes those stocks whose Earnings just came out in last two days.
Screen criteria:
- Earnings Date: Next Trading Day following EA
- Predicted Move (On 1st Day): 7% or less
- Predicted Move (On 7th Day): 7% or more
Strategy Guideline:
- Buy the stock if stock has reacted positively. Short the stock if stock has reacted negatively (see above).
- Close the position in 7-10 days, or possibly earlier based on price move.
Number Of Trades:
On average, our proprietary algorithm generates about 10-20 trades per month. Since our algorithm crunches lot of earnings data to detect Ride-the-Wave options trading ideas, It generates more trades during the Earnings season and fewer trades in the off-Earnings Season.