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.
Time to close out the FDX spread. Because of the overall sell-off, FDX may continue to drop, but the longer we hold the position, the more the time premium will erode.
This is a trade-off when you hold options that expire the same day.
I would rather capture more time.
Here is how you do it:
Sell to Close August 23rd - $155 Put for $1.70
Buy to Close the August 23rd - $152.50 Put for $0.40
The net credit will be is $70 per spread.
Based on the suggested 10 lot, the sale will net $700 or just over a 100% return for a few days.
If you do not enter the closing position as a spread, be sure you close the short $152.50 put.
