While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to 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 one more suggestion. This trade is based on expected volatility without a directional bias.
The trade will be on Walt Disney Co. (DIS).
DIS is trading around $107.12 as I write this.
I am going to suggest a straddle on DIS and use the January 25th expiration.
Basically, using the short-dated expiration gives us until January 11th to see if it can move.
The risk is the stock does not move by the 11th.
Here is the suggestion:
Buy to Open January 25th $107 call for $3.35
Buy to Open January 25th $107 put for $3.10
Total debit will be $6.45 per straddle.
Limit the buy in to a 2 lot or 1.3% of the nominal portfolio.