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 FedEx Corp. (FDX).
FDX does not report until December 17, and this suggestion will be using weekly options, so earnings will not be a factor.
FDX is trading around $156.32 as I write this. This trade is based on the assumption that I fell it is possible the low for the week is in.
The suggestion today is this ...
Buy to Open November 22nd - $157.50 call for $1.25
Sell to Open November 22nd - $160.00 put for 0.55
The net debit will be $0.70 per spread.
I am suggesting the debit spread because FDX is slightly out of the money.
With a net debit of 70 cents per spread, I suggest you limit the trade to an 8 lot or about 0.56% of the portfolio.
If FDX moves above $160 by Friday, the net profit will be $180 per spread or $1,400 in total if you trade the 8 lot.
The return would be 257% at the maximum value.
Because I am suggesting a short term weekly trade, I suggest limiting the position size to an 8 lot or 0.56% of the nominal portfolio.
