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 a suggestion on Apache Corp (APA).
Oil is making a bounce today and as a result, APA is bouncing as well. It is too early to predict if a longer term bottom is in play, but I do feel the XLE will bounce.
APA is trading around $47.46 as I write this.
I suggest a debit spread on the position, structured as follows:
Buy to Open October $47.50 call for $3.45
Sell to Open October $52.50 call for $1.55
The net debit will be $1.90.
Should APA trade above $52.50 by the third week in October, the maximum value of the spread will be $5 less the $1.90 you paid for it.
The result will be a return of $3.10 or a gain of about 160%.
Limit the trade to a six lot which works out to 1.14% risk based on the nominal portfolio.