August 27, 2015 - MDT

While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to six-month time frame, Mad Day Trader, provided by Bill Davis, will exploit money-making opportunities over a brief ten minute to three day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points.

In this morning's daily update, I mentioned how I felt that the XLE was at a key inflection point.

An inflection point to me is when a stock or sector is at a level where something significant is going to happen.

If it breaks down, it should continue much lower.? If it bases, it is likely that a major turning point is possible.

As I write, the XLE is up just over 5% on the day, which leads me to believe that the latter maybe the case.

Based on this, I want to make a recommendation today.

It is actually a Master Limited Partnership or MLP.

The company is Vanguard Natural Resources, LLC, symbol VNR.

There are a few reasons why I like this deal.

The first is that it pays a monthly distribution of $.118 per month.

Based on a price of $8.94 as I write this, the annual yield is 15.8%.

As you know, there is no guarantee that they will maintain this distribution.

The second reason I like this is because there was recently some major insider buying, which leads me to believe they will maintain that distribution level.

The final reason I like this is because, unlike most MLP's, VNR actually has decent option premiums.

My suggestion is to buy VNR at the market, which is $8.95 as I write this.

Because it appears a bit overextended on the short term charts, I will suggest you Sell to Open (1) September $9 call for every 100 shares you buy.

They are quoted at $.35 to $.60, with the last sale at $.50.

Try and sell them for $.50.

This is for a full allocation or about 1,100 shares, based on a $10,000 investment

Legal Disclaimer

There is a very high degree of risk involved in trading. Past results are not indicative of future returns. MadHedgeFundTrader.com and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein. Affiliates of MadHedgeFundTrader.com may have a position or effect transactions in the securities described herein (or options thereon) and/or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies.