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.
Like a lot of stocks today, Xilinx, Inc. (XLNX) is getting a nice bounce. It is trading around $109 as I write this.
I am going to suggest a longer term credit spread.
My suggestion is to go out to the September monthly options.
Here is the trade:
Buy to Open September $110 Call at $4.80
Sell to Open September $115 Call at $2.70
The net debit will be $2.10 per spread, with a maximum return of $2.90 per spread, or slightly over 100%.
Based on the nominal portfolio, I suggest you limit this trade to 5 spreads or a risk of about 1% of the portfolio.
