Event Driven Trading

Use the TMX/TSX corporate calendar and SEDAR+ for earnings, AGMs and filings, the Bank of Canada website for its fixed announcement dates, company investor-relations pages for guidance, and financial portals like Investing.com for economic events. Build your own watchlist of stocks and track their event calendars weekly.

It depends on your conviction and risk tolerance. Pre-event trading offers higher reward but requires conviction about the outcome. Post-event trading is lower risk because you see the actual outcome first. Many traders combine both - position before with part of capital, then adjust after based on the outcome.

Stocks are priced based on expectations, not absolute results. If the market expected 20% growth and actual was 15%, the stock may fall even though 15% growth is objectively good. The 'surprise' (actual vs expected) determines the move, not whether news is good or bad in isolation.

IV (Implied Volatility) rises before events due to uncertainty and 'crushes' (drops sharply) after the event when uncertainty resolves. If you buy options before an event, IV crush works against you even if the stock moves in your direction. Consider spreads to reduce IV exposure.

Generally 1-3% of capital per event trade, with 1-2% for high-impact binary events like earnings. Maximum total event exposure should be about 15% of capital across all positions. Event trades have higher variance, so conservative sizing is important.

Check: (1) Options IV - high IV suggests uncertainty, (2) Pre-event price drift - has the stock already moved toward the expected outcome? (3) Options positioning - heavy call or put buying suggests a direction consensus, (4) Analyst revisions - recent upgrades/downgrades. If all point one way, the event may be priced in.

Straddles/strangles profit from large moves in either direction but are expensive due to elevated IV. Iron flies/condors profit if the stock stays flat but lose on large moves. Calendar spreads can profit from the IV differential regardless of direction. Your choice depends on whether you expect a large move. On low-vol Canadian names (big banks), buying premium often does not pay.

For announced deals: merger arbitrage - buy the target at a discount to the offer and capture the spread as the deal closes. Factor in Competition Bureau review, Investment Canada Act review for foreign buyers, and the fact that most deals close as a court-approved plan of arrangement. For speculation: watch unusual options activity and consolidation signals. The take-over bid regime triggers at 20%, with early-warning disclosure at 10%.

Yes. Macro events affect multiple stocks/sectors, so use S&P/TSX 60 index futures (SXF)/options or sector ETFs rather than individual stocks. The impact is usually smaller per stock but more systematic (a dovish surprise tends to lift banks and utilities). Consider sector rotation (long beneficiaries, short losers). Always read the tone of the BoC statement, not just the rate.

Build an event portfolio: maximum 8-10 positions, no more than 3 in the same sector, no more than 2 in the same week. Track correlations - Canadian bank earnings in the same week, or several energy names on an oil move, are highly correlated. Allocate capital based on a conviction score. Keep a cash buffer for post-event opportunities. Review weekly.

Collect historical event data (outcome, surprise, price reaction). Engineer features: surprise magnitude, guidance change, pre-event momentum, IV percentile, sector context. Train a regression model (predict return) or a classifier (predict direction). Use walk-forward validation. Key: ensure no look-ahead bias, and remember the Canadian sample is smaller, so be wary of overfitting.

Depends on the sector. For retail: credit card data, web traffic, app downloads. For tech: app rankings, developer activity. For industrial/energy: satellite imagery, rail-car loadings, shipping and storage data. Start free: Google Trends, social sentiment, job postings. Paid: Sensor Tower, SimilarWeb. Always backtest before trading, and never use material non-public information.

Before events, the term structure often inverts (near IV > far IV). Trade calendar spreads: sell near-term (high IV), buy far-term (lower IV). Profit from the differential crush when near-term IV drops more. Risk: large moves can overwhelm the IV gain. Size conservatively, consider gamma risk, and stick to liquid names (often the US listing of an inter-listed stock).

For market risk: S&P/TSX 60 index puts proportional to your long exposure. For sector concentration: sector-ETF shorts or puts. For volatility: VIXC calls (or US VIX products) if expecting a volatility spike. Dynamic hedging: adjust as events resolve and new positions enter. Cost-benefit: hedging costs money - only hedge material risks.

Use alternative data to inform conviction, not to replace analysis. Process: (1) Traditional analysis gives the base case, (2) Alternative data provides confirming/conflicting signals, (3) Adjust conviction based on alignment, (4) Size the position based on combined confidence. Document which signals were useful for refinement.