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.
That stock is Dynergy Inc. (DYN).
DYN is trading around $12.55 as I write this. It does not have weekly options, but the October monthly options expire next week.
My suggestion is to buy DYN at the market, which is $12.55 as I write this.
Then Sell to Open (1) October $12.50 call for every 100 shares you buy.
The October $12.50 calls can be sold for about $.48.
If the calls are assigned next Friday, you will give back 5 cents on the stock price, but you will have captured a net of $.43 per share by selling the calls.
The return, if assigned will be 3.4% for a little over a week of holding the stock.
If the calls are not assigned, the stock is protected down to $12.12 and I would look to sell more calls.
Limit the position to a 1/2 allocation, which would be 400 shares.
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October 14, 2016 - Quote of the Day