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.
I’m banking on the fact that I believe a short term bottom is in for oil.
Based on that, I am going to make a suggestion on an oil company.
The company is Apache Corp. (APA).
APA is trading around $45.85 as I write this.
I like the fact that APA has weekly options.
So, here is my suggestion.
Buy to Open the April 2016 $45 calls.? They are being quoted at $4.95 to $5.30, with the last trade at $5.25.
Based on a 2% allocation to this position, for tracking purposes, I will assume you buy 4 of them.
Try and buy them for $5.00.
Once you are filled, then Sell to Open (1) November 6th-$48 calls against your long position.
For tracking purposes, I will sell 4 of these.
The November 6th-$48 calls are quoted at $.42 to $.52.
Try and sell them for $.45.
Assuming you sell them for $.45, you will have recouped almost 10% of the cost of the long position.
As a summary, here is the trade:
Buy to Open April 2015-$45 calls for $5.00
Sell to Open November 6th – $48 calls for $.45