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.
With a shortened holiday week next week, I would like to take advantage of free days of time premium decay.
The stock I am going to suggest does have weeklies and that stock is Advanced Micro Devices, Inc. (AMD).
AMD is trading around $12.77 as I write this. And the $13 call that expires next Friday is quoted at $.35 to $.38. And there is open interest of over 5,000 contracts.
My suggestion is to buy AMD at the market at $12.77. Then Sell to Open (1) July 7th – $13 call for every 100 shares you buy. Try and sell them $.36.
If these calls are assigned next Friday, the return will be 4.6% for just over a week.
Based on the tracking portfolio, I will limit the buy in to 500 shares or a 6.4% allocation.