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 on a longer term debit spread.
And that is going to be on Bank of America (BAC).
BAC just announced a $20.6 Billion share buyback and I am going to use this announcement as a put on the stock.
In addition, BAC is sitting right on the midband on its daily chart, which should be a support level.
So, my suggestion today is this:
Buy to Open November $28 call @ $1.78
Sell to Open November $31 call @ $.62
The net debit will be $1.16, with a maximum gain of $1.84.
Based on the nominal portfolio, limit the trade size to a 10 lot of about 1% of the portfolio.