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azatlin
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I harvest data, extract the signal and convert it into actionable trades.
  • Trades Only Hedge Funds Get To See 1 comment
    Mar 14, 2014 5:19 PM

    I predict earnings surprises for companies in the Russell 1000 for Institutional Investors.

    My track record: 60% of my calls have had a positive return. The average return per trade is 1.2% for a 2 day hold.

    Why earnings surprises Like Willie Sutton said about robbing banks, "because that's where the money is." Earnings day is when a company's stock price will move the most. Up or down. It's almost pure Alpha.

    My System: Sorry, my black box is proprietary. It is based on fundamentals (i.e. not technicals).

    Why am I sharing it: To establish a public papertrail. You won't get as rich data or as early, but you'll still get it.

    What to expect Each week, prior to earnings releases, I will publish: company, position to take (long or short), specific dates to open and close the position. For simplicity sake, returns will be calculated as the difference between the closing price on the day the position was opened and the closing price on the day the position was closed. All trades are opened the day before (regardless of earnings release before or after market close) and closed 2 trading days after release.

    Note: Be advised that actual earnings release dates may vary from those I post. The actual trade dates may therefore be appropriately shifted

    Good luck!

    -------------------------------

    WEEKS&P 500 RETURNSOUTHBAY RETURN (AVG. PER TRADE)# Trades
    20-Jan-2.66%1.69%32
    27-Jan-0.39%1.03%37
    3-Feb0.79%0.82%30
    10-Feb2.34%1.29%31
    17-Feb-0.16%-2.01%20
    24-Feb1.25%-0.75%25
    3-Mar1.02%2.14%6
    March 10 preliminary-1.97%2.40%5
    SYMBOLEARNINGS RELEASE DATEOPEN POSITION DATECLOSE POSITION DATECALL
    ADBE18-Mar3/17/20143/20/2014Short
    CAG20-Mar3/19/20143/24/2014Long
    JBL19-Mar3/18/20143/21/2014Long
    CCL21-Mar3/20/20143/25/2014Long
    GIS19-Mar3/18/20143/21/2014Short
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  • azatlin
    , contributor
    Comments (9) | Send Message
     
    Author’s reply » In response to questions about the strategy: it all comes down to math.

     

    The average return when a company surprises on earnings = 5%

     

    At 60% accuracy, for every 10 calls, I will be right 6 times and wrong 4 times. On average, the wrong calls are offset by the right calls, and that leaves 2 right calls or 10% return (5% * 2).
    That 10% is 1% on average per trade. That's about what I have been getting the last 8 months.

     

    How good is a 1%? Considering that this is a 3 day trade, 1% translates into a 235% annualized return. And that's before any compounding.

     

    The focus is always on improving accuracy.
    When accuracy falls below 50%, returns go negative. The weeks of Feb 17 and 24 saw a 45% accuracy rate.
    Conversely, the latest 2 weeks saw 67% and 60% accuracy. Returns averaged 2%+.

     

    Over time, I have come to know how to achieve 70% accuracy. That is for fee
    14 Mar 2014, 08:13 PM Reply Like
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