The One-Week Pre-earnings Momentum Trade With Options in Magellan Health Inc – CML News

This article was originally published on this site

The results here are provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation.

There is a bullish momentum pattern in Magellan Health Inc (NASDAQ:MGLN) 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, but for now it is a momentum play that has not only returned 231.5%, but has also shown a win-rate of 64%.

This same strategy also worked in the throws of the bear market from 2007-2008, and we disucss those results near the finale of this article.

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 Magellan Health Inc.