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.
The VIX is starting to get a bid today and is up 64 cents as I write this.
This may be the start of some profit-taking in the markets.
As a result, I want to suggest a short term put debit spread on Facebook (FB).
I don't want to buy a lot of time with this trade, but I do want to go out to next Friday's expiration.
Here is the trade:
Buy to Open April 12th - $172.50 Put for $1.64
Sell to Open April 12th - $167.50 Put for $0.58
The net debit is $1.06 per spread with a maximum return of about $4.00 per spread.
Because these are short-dated options, I suggest you limit the trade to a 6 lot, or 0.6% of the portfolio.
