Pre Earnings move in Apple (Ticker Symbol: AAPL) and what to do post earnings.
By now you know that we love earnings season at FibKing Trading. In fact we have an entire chat room for earnings related trades whether it is pre-earnings or post earnings. To learn more about our membership CLICK HERE.
We like to look at various days before an earnings event and test them. In this example let's take a look at 3 days before earnings on AAPL.
What we're looking for:
The chart shows us data over the last two years. Of the last 8 earnings, 6 of them moved up 3 days prior to earnings for an average of $1.52. Only twice did the stock move down 3 days prior to earnings. We also look at the 10 day moving average and see that we are above this technical indicator. When the stock is above the 10 day EMA, it typically moves on average 6 bars or $4.07. So we see that this could have a bullish tone but we are looking at Implied Volatility as our main play. I ran the back test of buying a 40 delta call and over the last 2 years, this particular setup was 2 wins and 0 losses for a total of 126% return. What if we didn't use the 10 day EMA? The results were near the same as far as overall return goes but you had 4 wins and 4 losses. I'd rather cut any losses and play the winners!
Options were purchased for 2.87 on Friday, January 25 and sold on Tuesday, January 29 for 3.25 and 3.05. While the returns aren't huge, a win is still a win!
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