September 8, 2016 - MDT Alert (CIEN)

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.

Today I would like to make a suggestion on a stock that recently reported favorable earnings.

That stock is Ciena Corp. (CIEN).

CIEN reported last Thursday and was up 8% on the announcement.

As I write this, CIEN is trading around $22.50.

The front week options are fairly active, but I am not going to suggest that series.

After the front week, we need to go out to October 21, to find active options.

My suggestion is going to be a debit spread.

Buy to Open the October 21st-$22 call for $1.39

Sell to Open the October 21st- $24 call for $.52

The net debit will be $.87

The maximum return will be $2.00, net of the $.87 or $1.13.

The advantage to this strategy is that if CIEN drops a bit further, I will suggest we close out the short $24 calls.

For the tracking portfolio, I suggest you trade a 20 lot or a total of $1,740.

This represents a 1.7% allocation, with maximum gains of $1,113.

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