The One-Week Pre-earnings Momentum Trade With Options in Commerce Bancshares Inc – CML News

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PREFACE
There is a bullish momentum pattern in Commerce Bancshares Inc (NASDAQ:CBSH) stock 7 calendar days before earnings, and we can capture that phenomenon explicitly by looking at returns in the option market. The strategy won’t work forever, and in fact, it hasn’t even won more often than it has lost. But since the winning trades are so much larger than the losing trades, it has returned 148.9% even with a win rate that isn’t above 50%.

LOGIC
The logic behind the test is easy to understand — in a bull market there can be a stock rise ahead of earnings on optimism, or upward momentum, that sets in the one-week before an earnings date. Now we can see it in Commerce Bancshares Inc.