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.
Today, I would like to make a suggestion on McDonalds Corp. (MCD)
MCD is oversold in the short term and I do believe it should get a technical bounce.
The idea is that the it makes the bounce before this Friday and we can put on a trade using the front week options.
Here is the idea ...
Buy to Open November 1st - $192.50 call for $1.60
Sell to Open November 1st - $195 call for $0.54
The net debit will be $1.06 per spread and the maximum value will be $2.50 per spread or a 135% gain is MCD moves above $195 before Friday.
Because I am suggesting that you trade the front week calls, I suggest you limit the trade to a 5 lot or 0.5% of the nominal portfolio.