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NikTam

CML TradeMachine Trade Ideas

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INTC -- Entered Long Call Pre-Earnings trade today.  It's supposed to be 3 days before earnings -- Oct 26 AMC -- but with the dip in the market today and the decent percentage of success even holding thru earnings I went with it with one day left.  A cowardly 1/8 position.  Oct 27 Long Call 41 for .52   40 delta

http://tm.cmlviz.com/index.php?share_key=s_0_20171025050837_qVWcd9B46GfJLRmg

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Also I note that Q was a high percentage 11:1 winner 3 day Pre Earnings play.  But it would have been a loser this time around.  Earnings are BMO tomorrow so today is last day of trade (although holding through earnings up to 3 days afterwards tests well also - if you have the stomach for holding through earnings).  The stock was up on the 23rd which was the buy-in date and has drifted down with the market since then -- and now I see that there are no weekly options or 40 delta contracts available.  Not sure how CML back-tests this ticker for 3 and 7 day pre-earnings if no weekly contracts available...?

 

My strategy is to do multiple small positions on candidates that are 80% or better back-tested winners.  Get out with OCO of 40% profit/25% loss.

Edited by NikTam
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NVDA should be noted as upcoming but I have yet to find earnings confirmation.

1 hour ago, NikTam said:

TTWO -- I'm also in this 14 day Pre Earnings trade.  Very high percentage backtest winner.  Opened Nov 17 long call at 3.10  40 delta.  1/4 position.

http://tm.cmlviz.com/index.php?share_key=s_0_20171025034954_HOHyXaA9EAVVHGqd

What strike did you enter this one at? 40 delta might be different, this has run up quite a bit today. Sad to have missed it.

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2 minutes ago, NikTam said:

@Sirion  I entered the 108 at 3.10.  It's actually down right now -- 2.75 -- might not be bad time to get in.

Earnings Whisper says Nov 9 AMC for NVDA. 

 http://tm.cmlviz.com/index.php?share_key=s_0_20171025045659_a4Z1HH9LsGHyFPC0

That seems to be the expectation, but I don't know if it's been confirmed yet or not. 

 

I entered at 2.90 a few minutes ago. I don't think it would actually fill at 2.75. Maybe 2.85, now that TTWO's come back a little.

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@NikTam Thank you for opening this thread and sharing these trade ideas.  I do like the pre-earnings straight call concept so I hope you will continue to post other candidates that show merit through CML back-testing.

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7 hours ago, NikTam said:

Also, I did Pre Earnings trades per CML on MSFT and BA last week.  Exited early with 40% profit on both.

I also took the MSFT trade last week and exited with a 40% gain after one day. That one worked nicely. Have you been doing a lot of these trades, and if so about how long does it take you to find one good trade when you doing your own searching?  I've been on the fence about a CML TradeMachine subscription for no other reason than the time available to actually do my own searching and am very curious. Just from following the trades Ophir has posted here on on his blog, I've found it takes a good amount of time just to look through the details and decide whether the summary results are representative of the detailed results. To date, I've made 62 trades with an average gain of 2.2%, which is a little lower than I had hoped for, but still not too bad.

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@greenspan76  You've done a lot more CML trades than I have.  I'm just getting started.  But I agree there is a fair amount of research needed.  I already see the need to set up a spreadsheet to make it more systematic.  The devil is always in the details.  But I'm thinking the edge will be in the volume of trades executed, which means simpler is better.  Simple Calls or Puts or maybe verticals.  And I'm going to automate with OCO for profit and stop loss exits.  My daily routine is such that I can check in only 3 or 4 times during the trading hours.  With high volume of trades, trading costs are an issue; so TD should love this.  But 2%-3% average gain will be fine for 3 day or 7 day pre-earnings trades.  At 14 days I would hope for more.  And earnings are 4x a year -- there are also back-tested post earnings trades -- so what do you do in-between?  Maybe SO calendars?  The are fewer in number these days.

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2 hours ago, NikTam said:

@greenspan76  You've done a lot more CML trades than I have.  I'm just getting started.  But I agree there is a fair amount of research needed.  I already see the need to set up a spreadsheet to make it more systematic.  The devil is always in the details.  But I'm thinking the edge will be in the volume of trades executed, which means simpler is better.  Simple Calls or Puts or maybe verticals.  And I'm going to automate with OCO for profit and stop loss exits.  My daily routine is such that I can check in only 3 or 4 times during the trading hours.  With high volume of trades, trading costs are an issue; so TD should love this.  But 2%-3% average gain will be fine for 3 day or 7 day pre-earnings trades.  At 14 days I would hope for more.  And earnings are 4x a year -- there are also back-tested post earnings trades -- so what do you do in-between?  Maybe SO calendars?  The are fewer in number these days.

On the trades I've taken from the blogs and such, by the time I download the trades and sort through them on a spreadsheet to determine if the trade has promise, it takes too much time to only average 2-3% gains, even for short holding periods. Just for the sake of accuracy, my numbers were after trading costs using IB, but I looked a little closer and realized I had duplicated some trades in those numbers (where I made the same trade in my brokerage and IRAs), so it was actually 45 total closed trades and an average holding period of almost 14 days. The only reason I'm still trading them is because a handful of trades skewed both the average gain downward and the average holding period upward, and I'm inclined to believe that more selective trading would produce reasonable results.

Edited by greenspan76
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@greenspan76 On reflection I would agree - the average net return will need to be higher to justify the setup time and the commitment to CML as a trading program.     I will give it 90 days of active trading and see how it looks.  

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I'm out of this trade with 40% gain.  OCO GTC at .70 took me out in first minute of market when stock gapped up.

 

Posted 8 hrs ago:  INTC -- Entered Long Call Pre-Earnings trade today.  It's supposed to be 3 days before earnings -- Oct 26 AMC -- but with the dip in the market today and the decent percentage of success even holding thru earnings I went with it with one day left.  A cowardly 1/8 position.  Oct 27 Long Call 41 for .52   40 delta

http://tm.cmlviz.com/index.php?share_key=s_0_20171025050837_qVWcd9B46GfJLRmg

 

 

Edited by NikTam

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21 minutes ago, NikTam said:

I'm out of this trade with 40% gain.  OCO GTC at .70 took me out in first minute of market when stock gapped up.

 

Posted 8 hrs ago:  INTC -- Entered Long Call Pre-Earnings trade today.  It's supposed to be 3 days before earnings -- Oct 26 AMC -- but with the dip in the market today and the decent percentage of success even holding thru earnings I went with it with one day left.  A cowardly 1/8 position.  Oct 27 Long Call 41 for .52   40 delta

http://tm.cmlviz.com/index.php?share_key=s_0_20171025050837_qVWcd9B46GfJLRmg

 

 

Good one. I chickened out and now bite my nails :)

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Looking at W (Wayfair) 3 day P-E (Pre-Earnings) play.  It has an impressive 11:1 back-test history.  But this cycle it is in a pronounced downtrend and the 3 day pre-earnings trade would mean entering tomorrow and exiting on Tuesday (for shorter term trades weekend days don't count).  It announces BMO Wed the 2nd so 1 day before earnings would be Tuesday the 1st.  I'm going to watch this one into Monday to see if there is a turn-around in direction. 

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@Djtux  YUM is a 7 day P-E play but IMHO would not have bought it earlier based on chart.  But today it is bouncing off the daily 34 day low trend line.  The 3 and 4 day iterations also look good. I like this one and I will get into it today with a small position.  Thanks for heads up!

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12 minutes ago, Djtux said:

How about YUM ?

They report 11/02 BMO, so entry would be today EOD ?

http://tm.cmlviz.com/index.php?share_key=s_0_20171026141927_pOHXgfjXrwxboKzr

 

1 minute ago, NikTam said:

@Djtux  YUM is a 7 day P-E play but IMHO would not have bought it earlier based on chart.  But today it is bouncing off the daily 34 day low trend line.  The 3 and 4 day iterations also look good. I like this one and I will get into it today with a small position.  Thanks for heads up!

40 delta calls?

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Yes -- 40 delta.  Mid at 1.05.  I'm going to buy 5 now and maybe 5 more later in day.  Still being very conservative.

 

Filled at 1.05

Edited by NikTam

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For MAR P-E there is a lot of variation when entering different time frames of just a day or two.  Best B-T (back-test) is 7 day P-E and closing either day before earnings -- Tuesday the 6th -- or even the day of earnings on the 7th since the announcement is AMC.  I like the chart.  I'm getting into this one tomorrow.

 

@akito Getting in next Tuesday would make this a 5 day B-E trade but the results look good for that, too.  I think I will get in tomorrow and maybe add on Monday and/or Tuesday if market direction is looking good.

Edited by NikTam

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Getting a few more opportunities in this one than I thought. For now, I'm entering YUM as a ~1/8th position because I currently have a YUM strangle going and don't want to overexpose.

Moving forward I'm going to have to consider how to handle that. Overall, I also want to make sure my profile doesn't become too long delta. 

(Raises the question if we could get some inverse trades going, but in this bull market I honestly doubt it)

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Just now, IgorK said:

IN for 1 call for 1.05. What is estimated return? 35%-40%?

Strategy calls for taking profits at 40%. 

Backtesting yields greater results due to always closing at end of day. Where you actually close is up to you.

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I like 40%.  OCO for profit and 25% stop loss is the way I'm going with this.  Running iterations indicates the volatility of past trade history and I can see that a 25% Stop Loss might be a problem with some tickers and I think I will avoid those rather than raise my loss potential.  With 40/25 I can win half the time and still be ahead --right?

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6 minutes ago, NikTam said:

I like 40%.  OCO for profit and 25% stop loss is the way I'm going with this.  Running iterations indicates the volatility of past trade history and I can see that a 25% Stop Loss might be a problem with some tickers and I think I will avoid those rather than raise my loss potential.  With 40/25 I can win half the time and still be ahead --right?

How do Id this in IB TWS?

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I did the MAR trade last cycle, but made a mistake and opened the morning of the day after I was "supposed to" open. Ended up with 18% gain vs the official CML gain of 53%. Unfortunately, I didn't keep good notes to know if trading it "correctly" under actual trading conditions would have resulted in near 53% gain.

Edited by greenspan76

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1 hour ago, NikTam said:

I’m doing a spreadsheet this weekend.  With so many prospective trades, I want to track this.    

Will you make it public?

Just now, RapperT said:

I want to echo some of the others and thank you @NikTam for putting this thread together

+1

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@NikTam Thank you for starting this thread...

Have you traded the after earnings Short Iron Condor and Long Straddles that some of the CML searches come up with?

 

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@Maji  No, I have not.  I have purposely tried to keep my  trades simple so Iron Condors are not part of my plan.  I want to automate exits and not so confident in that regard with multi legged strategies.  Straddles or Verticals could work.

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1 minute ago, NikTam said:

BOT MAR 7 Day P-E Long Call.  Delta 40 119 filled at 1.25.  My OCO is +40% / -25% .

Just curious. Any particular reason why you're entering now? Do the backtests show best results entering now? With earnings on 11/8 BO, 7 days before would be 8/31

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@akito Earnings Whisper says Nov 7 AMC.  So counting days beginning on Monday that would be 7 days.  You could wait until end of day to be conforming exactly to back-test parameters but I will be in meetings this afternoon.  I think I could have got in for better price -- and should have. 

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4 minutes ago, NikTam said:

@akito Earnings Whisper says Nov 7 AMC.  So counting days beginning on Monday that would be 7 days.  You could wait until end of day to be conforming exactly to back-test parameters but I will be in meetings this afternoon.  I think I could have got in for better price -- and should have. 

Ah, right. ER release looks to be on 11/7 AC, but earnings call is on 11/8 BO (I was looking at their website): https://investor.shareholder.com/MAR/events.cfm

(regardless, same result though, closing on 11/7)

 

Oh, you're only counting trading days? The backtests aren't based on calendar days? The CMLVIZ blog post also recommends entering on 10/31 though.

http://www.cmlviz.com/cmld3b/index.php?number=11776&app=news&cml_article_id=20171026_the-one-week-pre-earnings-momentum-in-marriott-international

(link from krisbee)

Edited by akito

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No I think you're right -- let me check my notes.

 

My CML support notes says that for 3 days or less only count trading days -- so I am in early.  Oh, well!  The devil is in the details.  And that's why I'm still doing small positions!

Edited by NikTam

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3 minutes ago, akito said:

Oh, you're only counting trading days? The backtests aren't based on calendar days? The CMLVIZ blog post also recommends entering on 10/31 though.

Yes the backtests are calendar days for CML.

 

15 minutes ago, NikTam said:

BOT MAR 7 Day P-E Long Call.  Delta 40 119 filled at 1.25.  My OCO is +40% / -25% .

Got filled at 1.10.

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4 minutes ago, NikTam said:

My apologies -- I am in early.  Back-test still looks alright for 9 days but not as good as 7 days.

CML says Tuesday?

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Yes -- the article @akito posted specifically says  Tuesday 10/31.  So I'm in early.  And I didn't use Calendar days in my calculation.

 

Edited by NikTam

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      Yes, there is a systematic way to trade this repeating phenomenon, without making a bet on earnings or stock direction.

      THE SET UP 
      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. The goal, is two-fold: (i) to benefit from that known implied volatility rise, and (ii) to own the straddle for a very short period of time when the stock might move 'a lot,' but taking no earnings bets. 

      If either of those two phenomena occur, there's a very good chance this wins, if neither occur, the amount risked is normally quite small. Here is the setup: 
       


      We are testing opening the position 6 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: 

      RETURNS 
      If we did this long at-the-money (also called '50-delta') straddle in Broadcom Limited (NASDAQ:AVGO) over the last three-years but only held it before earnings we get these results: 
       
      Long At-the-Money Straddle * Monthly Options * Back-test length: three-years * Open 6-days Before Earnings * Close 1-day Before Earnings * Holding Period: 5-Days per Earnings   Winning Trades: 5 Losing Trades: 7 Pre-Earnings Straddle Return:  17.1%  Annualized Return:  102% 
      We see a 17.1% return, testing this over the last 12 earnings dates in Broadcom Limited. That's a total of just 60 days (5 days for each earnings date, over 12 earnings dates). That's a annualized rate of 102%. 

      We can also see that this strategy hasn't been a winner all the time, rather it has won 5 times and lost 7 times, but here's the key -- it wins about half of the time, but the average gain per winning trade is substantially larger than the average loss on a losing trade: 
       


      Consistently Successful 
      This idea has also been a successful approach over the last two-years:
      Long At-the-Money Straddle * Monthly Options * Back-test length: two-years * Open 6-days Before Earnings * Close 1-day Before Earnings * Holding Period: 5-Days per Earnings   Winning Trades: 4 Losing Trades: 4 Pre-Earnings Straddle Return:  22%  Annualized Return:  198% 
      Now we see a 22% return, testing this over the last 8 earnings dates which is a annualized rate of 198%. 

      Yet again, we see a trade that wins about half the time, but the average win is much larger than the average loss: 
       


      If you really want to see how we found this, and how to do it for other stocks like Apple, Google and Amazon, here is a 1-minute and 34-second video that every professional option trader would rather that you don't see. 

      Learn more here: Try the Back-tester Yourself

      WHAT HAPPENED 
      There are patterns to stock behaviors before and after earnings and those patterns reveal opportunities in the option market, without taking the actual risk of earnings. You can find them, stock by stock. This is how people profit from the option market -- it's preparation, not luck. 

      To see how to do this for any stock we welcome you to watch this quick demonstration video: 
      Tap Here to See the Tools at Work

      Thanks for reading. 

      Risk Disclosure 
      You should read the Characteristics and Risks of Standardized Options. 

      Past performance is not an indication of future results. 

      Trading futures and options involves the risk of loss. Please consider carefully whether futures or options are appropriate to your financial situation. Only risk capital should be used when trading futures or options. Investors could lose more than their initial investment. 

      Past results are not necessarily indicative of future results. The risk of loss in trading can be substantial, carefully consider the inherent risks of such an investment in light of your financial condition. 

      Back-test Link
       
       
       
       
       
       
       
       
    • By Ophir Gottlieb
      The Secret Behind Options Pre-Earnings Trading in Intel Corporation (NASDAQ:INTC)
       
       
      Intel Corporation (NASDAQ:INTC): The Wonderful Secret Behind Options Pre-Earnings Trading
      Date Published: 2017-05-4

      PREFACE 
      There is a wonderful secret to trading options right before earnings announcements in Intel Corporation (NASDAQ:INTC) , and really many stocks, that benefits from the rising implied volatility but avoids the risk into the actual earnings release and also avoids any kind of stock direction risk. 

      THE WONDERFUL SECRET 
      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. 

      The goal, is two-fold: (i) to benefit from that known implied volatility rise, and (ii) to own the straddle for a very short period of time when the stock might move 'a lot,' but never take the risk of actually owning options during the earnings release. 

      If either of those two phenomena occur, there's a very good chance this wins, if neither occur, the amount risked is normally quite small. Here is the setup: 
       


      We are testing opening the position in Intel Corporation 6 days before earnings and then closing the position right before earnings. This is not making any earnings bet. This is notmaking any stock direction bet. 

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

      RETURNS 
      If we did this long at-the-money (also called '50-delta') straddle in Intel Corporation (NASDAQ:INTC) over the last three-years but only held it before earnings we get these results: 
       


      We see a 47.8% return, testing this over the last 12 earnings dates in Intel Corporation. That's a total of just 72 days (6 days for each earnings date, over 12 earnings dates). That's a annualized rate of 242%. 

      We can also see that the win/loss rate is split with 6-wins and 6-losses, yet the return is enormous. That means the winning trades are much larger than the losing trades, which is exactly what a successful trading strategy attempts to do. No magic bullets -- rather smart methodologies for wealth creation. 

      MORE TO IT THAN MEETS THE EYE 
      While this strategy is benefiting from the implied volatility rise into earnings for Intel Corporation (NASDAQ:INTC), what it's really doing is far more intelligent. 

      The ideal stocks for this strategy have a couple of common characteristics: 

      (i) The companies rarely pre-announce earnings -- this is an investment that does not look to make an earnings bet, so an earnings pre-announcement is the opposite of what we're hoping for. 

      (ii) The underlying stock price of these companies tend to move a lot (or some) as earnings approach and various institutions and traders shuffle the stock price around in anticipation of the earnings result. The more one sided the outside world starts betting on direction -- up or down, the better it is to own the straddle. 

      WHAT HAPPENED 
      This is it -- this is how people profit from the option market -- it's preparation, not luck. 

      Test the results on Apple Inc and Alphabet Inc, and the results are staggering. 

      To see how to do this for any stock and for any strategy with just the click of a few buttons, we welcome you to watch this quick demonstration video: 
      Tap Here to See the Tools at Work 

      Thanks for reading. 

      Risk Disclosure 
      You should read the Characteristics and Risks of Standardized Options. 

      Past performance is not an indication of future results. 

      Trading futures and options involves the risk of loss. Please consider carefully whether futures or options are appropriate to your financial situation. Only risk capital should be used when trading futures or options. Investors could lose more than their initial investment. 

      Past results are not necessarily indicative of future results. The risk of loss in trading can be substantial, carefully consider the inherent risks of such an investment in light of your financial condition. 

      The author has no position in Intel Corporation Inc (NASDAQ:INTC) as of this writing. 

      Back-test Link (does require custom earnings settings).
       
       
       
       
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