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.
As I sift through the carnage from yesterday’s sell off, there is one stock that looks like it is ready for a rebound.
That stock is Disney (DIS).
Since topping out at $116.10 on the April 27th, DIS has sold off and now trades around $106.60.
From a technical standpoint, it is sitting right on its 200-day exponential moving average.
This also happens to be the lower extreme bollinger band on its 60-minute chart.
Based on this, I do expect a bounce.
DIS also has weekly options.
I am going to suggest a calendar spread.
Here is my suggestion:
Buy to Open July 2017? $105 Call for $3.60
Sell to Open May 26, 2017 $109 Call for $.23
The net debit will be $337 per spread.
The short term call will help to offset the cost of the longer term call.
Based on a fill of $337 per spread, I suggest you limit this trade to a 4 lot or 1.34% of the nominal trading portfolio.
The market appears to be holding for now, but another leg down to 2,343 on the S & P 500 could be possible.