Swing Model Backtesting during Earnings

In this Guide we want to share the Swing Model Backtesting Results during one of the busiest earnings release week. We are looking at the week of 10/28/2024 to 11/01/2024. Companies like Google, Apple, Amazon, Meta and more reported this week.

We go over the full backtest during our Live here below:

Backtesting Assumptions

The backtest has the following assumptions:

• Data was taken from MenthorQ Swing Trading Model as of Sunday 10/25/2024. The levels from Sunday are calculated after market close on the previous Friday.
• We then took the Bias given by the model weather Bullish or Bearish and we downloaded the various levels: Upper Band, Lower Band and Risk Trigger.
• We then trade at the Open of Monday 10/28/2024.
• The entry price is at the open and the exit price follows various assumptions as per the below strategies.
  

Here you can find the File with the Data and Results.

Backtesting Strategies

We then created various entry and exist strategies. We trade based on two approached: Going Long Short the Stock or by selling Credit Spreads using Options.

Long / Short Stock

Strategy 1:

• Long / Short Underlying Stock. We trade the Stock at the open of 10/28/2024.
• Entry: Going Long if the Bias was Bullish and Going Short if the Bias was Bearish.
• Exit: We close the trade at the open of the day after the earnings report.

Strategy 2:

• Long / Short Underlying Stock. We trade the Stock at the open of 10/28/2024.
• Entry: Going Long if the Bias was Bullish and Going Short if the Bias was Bearish.
• Exit: We close the trade at the close of the day after the earnings report.

Strategy 3:

• Long / Short Underlying Stock. We trade the Stock at the open of 10/28/2024.
• Entry: Going Long if the Bias was Bullish and Going Short if the Bias was Bearish.
• Exit: We close the trade at the open price of Friday 11/01.

Strategy 4:

• Long / Short Underlying Stock. We trade the Stock at the open of 10/28/2024.
• Entry: Going Long if the Bias was Bullish and Going Short if the Bias was Bearish.
• Exit: We close the trade at the close price of Friday 11/08.

Here you can find the Summary Results that are also available on the File. Here are the findings:

• 3 out of 4 Strategies have a Win Rate of over 50%
• All the 4 strategies return a positive return of 2% or more for the Week
• Strategy 4 is the best performing with 67% Win Rate and a Portfolio Performance for the Week of 7.22%

Selling Credit Spreads using Options

The second type of strategy leverages the Swing Trading Levels and Bias to define our Credit Spreads. These are the assumptions:

• If Bias is Bearish we sell a Call Credit Spread using the Upper Band as the level for our Sold Call
• If Bias is Bullish we sell a Put Credit Spread using the Lower Band as the Level for our Sold Put
• We have created two strategies using the 5D and 20D Swing Model

Here are the details of the strategies:

Strategy 5: Swing Model 5D

• We sell a Put Credit Spread or Call Credit Spread at the Open of Monday 11/28/2024
• We use the 5 Days Swing Levels and we choose the Expiration of 11/01/2024
• We use the Lower Band for the Strike of our Sold Put if Bias is Bullish and the Upper Band for the Strike or our Sold Call if the Bias is Bearish

Strategy 6: Swing Model 20D

• We sell a Put Credit Spread or Call Credit Spread at the Open of Monday 11/28/2024
• We use the 20 Days Swing Levels and we choose the Expiration of 11/22/2024
• We use the Lower Band for the Strike of our Sold Put if Bias is Bullish and the Upper Band for the Strike or our Sold Call if the Bias is Bearish

Here you can find the Summary Results that are also available on the File. Here are the findings:

• Both strategies return a win rate of over 75% with Strategy 5 having a win rate of 87.5%.
• Strategy 5 returns a Portfolio Return of 7.26% for the week.