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.
Today I want to make a suggestion on Freeport-McMoran (FCX).
FCX is trading around $11.30 as I write this.
With a stock trading around this price, I usually suggest a covered call trade. However, I will not suggest that today. Instead I would like to use another strategy.
I am going to suggest a debit spread. And I am not going to suggest you buy a lot of time.
My suggestion today is this:
Buy to Open March 8th - $11.50 Call for $.54
Sell to Open March 8th - $13.00 Call for $.15
The net debit will be 39 cents or $39 per spread.
Based on a fill around 39 cents, limit the trade to a maximum of 15 spreads.
15 spread will cost a total of $585 or just under .6% of the nominal portfolio.
The maximum return will be $1,665 based on a 15 lot buy in.
