While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to a 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. Read more
I had recommended MFA back on March 20th based on two scenarios.
The first was that the stock carried a decent call option premium. And the second reason was because at the time, they were paying a hefty dividend.
With the turmoil in the mortgage market created by the Covid-19 pandemic, MFA has been forced to eliminate its dividend and deleverage.
Therefore, I am going to recommend you sell call options at every opportunity you get.
And this is one of those opportunities.
Here is the suggestion.
Sell to Open (1) June 19th - $4 call for every 100 shares you own. The June $4 calls can be sold for $0.65.
I know these calls are slightly in the money, but you should have
collected $0.40 in call premium on this position already.
This is more of a hedge at this point.
This alert applies only if you own shares in MFA.
If you followed the original alert, you would own 1,000 shares of MFA. Therefore you would be selling 10 calls.
While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to a 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. Read more
Today, I would like to make one more suggestion and it is on a stock that reports on June 25th.
The stock is McCormick & Co., Inc. (MKC).
MKC is trading at $172.46 as I write this.
I am going to recommend a debit spread using the front month June options.
Here is the trade.
Buy to Open June 19th - $175.00 call @ $2.30
Sell to Open June 19th - $180.00 call @ $0.80
The net debit will be $1.50 per spread, with a maximum gain of $3.50 per spread.
Based on the nominal portfolio, limit the trade to 4 spreads or 0.6% of the portfolio.
The trade allocation is small because I am suggesting you trade the front month contracts.
Today, I would like to make a recommendation on a stock that does have weekly options. And I want to suggest a weekly covered call.
And it is a stock we traded recently.
The stock is Clovis Oncology, Inc. (CLVS).
CLVS is trading at $7.31 per share as I write this.
My suggestion is to buy CLVS at the market, which is $7.33 as I write this.
Then Sell to Open (1) June 12th - $7.50 Call for every 100 shares you buy.
You should be able to sell them for $.25 per every option.
Based on the nominal portfolio, limit the share buy in to 600 shares or 4.4% of the portfolio.
Assuming you buy 600 shares, you would sell 6 of the June 12th $8 Calls.
If the calls are assigned this Friday, the return will be 5.7% for 5 days.
While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to a 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. Read more
Today, I am going to make one final suggestion and that is to book the profit on the AMN spread.
Here is the trade:
Sell to Close July 17th - $45.00 call @ $6.20
Buy to Close July 17th - $50.00 call @ $3.00
The net credit will be $3.20 per spread. This results in a profit of $1.45 per spread or $870 if you traded the suggested 6 lot.
The return for the four day holding period will be 83%.
Enjoy your weekend and profits from this week.
The PRA suggestion was never intended to be a long term hold, but rather a quick swing trade.
And as such, I am going to suggest you take your profit on the position.
Sell PRA at the market, which is $15.90.
Based on a purchase price of $14.27 four days ago, the return will be 11.4% for those four days.
I am going to use today's gap to suggest you book the profit on the AGNC position.
AGNC is just under the midband on the daily chart and above the upper band on the 60 minute chart, which suggests it maybe near a short term top.
And when I suggest a position and it moves away and comes back into profit, I suggest you take the profit.
Sell AGNC at the market, which is $14.17.
While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to a 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. Read more