There is a bullish momentum pattern in Baidu Inc (NASDAQ:BIDU) 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 316.7%, but has also shown a win-rate of 75%.
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.
That is, totally irrespective of the reality that follows — that is, independant of whether the stocks have a history of actually rising after earnings. There has been a way to profit from this pattern without taking any formal earnings risk in Baidu Inc.
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