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 a company that reported last week.
They reported Friday and gapped up off their earnings only to sell off.
I think this is an opportunity to trade a bounce.
The name of the stock is GrubHub Inc. (GRUB).
GRUB is trading around $65.67 as I write this.
My suggestion is going to be a short term debit spread.
Here is the trade:
Buy to Open May 4th $66 call for $1.60
Sell to Open May 4th $70 call for $0.40
The net debit will be $1.20 per spread with a maximum gain of $2.80 or 230%.
The volume on these calls is high enough where getting a fill should be relatively easy.
Because I am suggesting the front week options, limit the trade to 5 lot or 0.06% of the tracking portfolio.