Cindicator: A Crypto Tool for Stocks 100 Options Trades over 11 weeks for 84% gain
A guest post by CalvinXTZ, a Cindicator token holder
This article completes a series about trading stock options based on Cindicator’s earning reports indicators. I’ll summarize the trading strategy that has evolved over these 100 trades and 11 weeks. If you want more information or have questions, join the Cindicator_Chat in Telegram and contact me, Calvin XTZ, directly.
This information is for general purposes only and does not constitute any investment advice. You always trade at your own risk. I cannot guarantee and accept no liability whatsoever arising from or connected to, the accuracy, reliability or completeness of any information contained in this article. Cindicator has not verified the results contained in this article. Cindicator is not a sponsor of this article, nor does it endorse it in any way.
I am sharing information about an approach for trading stock options based on Cindicator’s predictions of earnings reports. If you think this is helpful and try it yourself, you do so at your own risk.
Please read the earlier articles about options trading in Q4 2018 and Q1 2019 and visit Cindicator’s website for detailed explanations of what this approach entails and how Cindicator works.
I should explain that I’m using a pseudonym because I am a financial advisor. I’m not recommending that you do this nor am I offering financial or investment advice. I’m just sharing a successful approach that might be helpful.
Introduction
Cindicator is a fintech company (its token is CND) that uses the blockchain for crowd sourced predictive analytics. It is one of the very few cryptocurrencies that have finished products that are used by token holders to make money.
Almost all other cryptos are for a platform or a process or an application that is used (or will be used when that particular crypto is no longer just a white paper) by someone other than the owner to do something that the owner isn’t doing. Investors buy those cryptos solely because they hope the price will go up, not because the investor will use it.
Cindicator, on the other hand, actually works. It has value for the owner regardless of the price of CND. You buy it, you receive indicators about stocks, cryptocurrencies, commodities, currencies, and you trade based on those forecasts. If you do it right, you make profits. If you do it often enough, you don’t care about the price of CND because you don’t want to sell it … you want access to those profit-making indicators.
I’ll admit that I want the price of CND to go up … but I really don’t care. Sure, if it zooms, I’ll sell a tiny amount. But I’ll continue to hold CND because I’m making a lot of money using Cindicator forecasts to help me trade in the world of stocks.
Owning Cindicator, which provides Hybrid Intelligence indicators that help me make profits, is like owning a crypto goose that lays golden eggs.
I’m keeping this goose.
The purpose of this article, last in a series of three, is to provide the details of the options trading strategy powered by Cindicator so that you can judge the veracity of my claim and to determine if it’s worth trying for yourself.
Warning: Cindicator is Easy but Stock Options are Hard, Risky and Complex. You must understand stock options to use this strategy.
This article does not teach you how to trade options. There are many resources to learn about options. Use those resources and understand stock options before trying this strategy.
What is Cindicator?
Cindicator builds predictive analytics by merging collective intelligence and artificial intelligence. This is based on the wisdom of the crowd hypothesis: a large group of individuals on average can make more accurate predictions than a few experts. Cindicator applies machine learning to increase the accuracy by taking into account analysts’ past forecasts and create ‘Hybrid Intelligence’ indicators.
Using Cindicator to Receive Earnings indicators
You must own 700,000 CND tokens for the Expert tier of Cindicator. At that tier, you receive all of the indicators of company earnings reports.
Cindicator Gives an Edge When Trading on Earnings Reports
Thousands of companies report earnings each quarter. Cindicator’s internal team of financial analysts monitors the market and applies fundamental, technical analysis and proprietary screens to identify the 70 to 80 companies that will be the subjects of the earnings predictions. Over the course of the earnings reporting season, Cindicator sends out the earnings questions to the 120,000+ decentralized analysts to solicit their predictions.
Cindicator receives the predictions and applies machine learning to increase the accuracy by taking into account analysts’ past forecasts and create ‘Hybrid Intelligence’ indicators.
Then the indicator for that earnings report is sent to holders of Cindicator’s token, CND, via Telegram bot.
That Indicator percent is the likelihood of reporting earnings above consensus. That’s the basis for the trades. If likelihood of beating the expectations is above 75%, I buy a Call option. If the likelihood is below 65%, I buy a Put option. More on the strategy later in this article.
Is Cindicator More Accurate Than the Historical Average of Beating Expectations?
Yes.
Over these 11 weeks, 94 indicators were issued and 74 were correct. That’s 79% correct. The average of all S&P 500 companies beating earnings over this same time frame was 74%. The historical average of beating earnings is 64%.
That’s a small difference over the 11 weeks of reports. But Cindicator amplifies the effect by carefully selecting the companies, out of the thousands reporting.
Is Cindicator More Helpful Than Trading on Every Company’s Report?
Yes.
It’s impossible for an individual to trade options on every company reporting earnings. Cindicator narrows the universe of companies to a select list for the predictions of earnings. Their selection process does increase the likelihood of profitable trades, at least in my experience. I made quite a few trades on my own, without the benefit of Cindicator’s filtering or indicators, and the results were much poorer than the Cindicator trades.
What is the Trading Performance Track Record?
Total of Both Quarters of Trading
Over the course of 11 weeks of trading, including the trades in the 4th quarter 2018 and 1st quarter 2019:
- Profit of 84%
- 100 options trades
Details of each quarter are presented later in this document.
Details of 4th Quarter 2018 Trading
I began trading options on the earnings indicators at about the mid point of the earnings season. As a result, there were only 23 trades done during this period. Not enough to draw any conclusions. But enough to convince me to do it again in the 1st Quarter of 2019.
Details of 1st Quarter 2019 Trading
The 1st quarter 2019 trading covers a complete earnings season so there were many more trades and more data to analyze.
Link to Spreadsheet with Statistics of 1st Quarter Trading
What is the Options Strategy that Delivered These Results?
I have developed and updated the strategy over the two quarters. Below is the summary.
- Keep position sizes consistent, risk the same amount for each trade;
- Purchase a Call option if the Indicator likelihood was 75% or higher
- Purchase a Put option if the Indicator was lower than 65%
- Use options that were at the money or near the money
- Use options that expire the week after the earnings report, if available, or the following month if necessary
- Open the positions very close to the date and time of the earnings report; either same day or day before
- If the stock move to breakeven is less than 4%, do the trade; if it's from 4 to 5%, consider the trade; if it's above 5%, do not do the trade
- Let the positions ride till close to expiration; give the profits a chance to rise and the losses a chance to decrease
- When in profit, close a portion of the position and let the balance continue with stop limits set at the price to cover the cost of the position
- Do every trade that meets your requirements of breakeven and position size; the number of trades matters.
How Do Ranges of Indicators Compare?
1st Quarter 2019 Analysis
NOTE: THE SUMS OF THESE COMPARISON NUMBERS WILL NOT MATCH THOSE IN THE SPREADSHEET BECAUSE I MADE ADJUSTMENTS FOR TRADES THAT WERE NOT OPENED
If I didn't do a trade because of position sizing or break-even move was too high, I still tracked whether or not it would have been profitable. But I don't have actual numbers for those trades.
In order to measure the success rate of bands of indicator strength (such as profitability of 90%+ indicators versus 80-to-90% indicators), I had to adjust for the trades that did not have any cost or profit numbers.
For those trades, I applied a cost of -$100. If the trade would have been profitable, I applied a profit of +$100. If it would have been a loss, I applied a loss of -$100.
This approximates the success of the bands of indicators. But it does not allow for profits in excess of 100% which would have been the case in a few of those trades.
Conclusion
I hope this series of articles is helpful in your trading. I will continue to trade options based on Cindicator’s forecasts. I might refine the strategy as I go forward and if I do, I’ll provide updates in the Cindicator chat in Telegram. You can reach me there for questions or comments.
And like I said at the outset, I’m keeping this goose.
Make forecasts with Cindicator:
- Improve analytical skills;
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