While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to the 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 would like to make a suggestion on a short term debit spread.
The stock is Yum! Brands Inc. (YUM). YUM is trading around 112.49 as I write this.
I do not want to use this week's expiration and, instead, suggest you go out to next week.
Here is the trade ...
Buy to Open September 27th - $112 Call for $1.65
Sell to Open September 27th - $115 Call for $0.46
The net debit will be $1.19 per spread. The maximum gain on the spread will be $1.81 per spread.
Based on the nominal portfolio, limit the trade to a 5 lot or 0.6% of the portfolio.
