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 company that recently reported earnings and had a beat.
That company is WDC.
I am going to suggest you use a 1% allocation to this position due to the fact that I will be using the front week contracts.
Therefore, the total allocation will be $1,000 based on a $100,000 portfolio.
Here is how I suggest you trade this.
Use 1/2 the allocation to buy the at the money $84 calls that expire this Friday.
They are quoted at $.97 to $1.09, so you should be able to buy 5 of them.
Then use the balance to buy the $86 calls, which are quoted at $.30 to $.34.
Based on a fill of $.32, you should be able to buy 15 contracts.
If WDC can rally to $86, I will suggest to close the $84 calls and let the $86 calls run.
Remember, these are the calls that expire August 7th.