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.
When I recommended RRC back on January 14th, the trade was based on the fact that RRC had come up from under the lower band on the daily chart.
And typically one of two conditions happens.
Either the stock does continue higher or it fails. And if it fails, it will usually retest the lower band again.
In this case, I believe the latter scenario is happening.
So, based on this, I am going to suggest the following:
Buy to Close February 15th - $12 call for $0.05
After you close the short option position, then initiate this trade:
Sell to Open February 22nd - $9 call for $1.00
By closing the short February 15th call, you will have collected $0.50 per share in option premium.
Instead of buying put protection, I would prefer to sell an in-the-money call.