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.
As I have mentioned in the daily updates, the XLE has now?hit the upper extreme bollinger band on the its daily chart.
That price level is 79.20 and today's high on the XLE is 79.42. The XLE?hit the hit upper band and is now trading about $1 to the downside.
Based on this, I want to make a suggestion on a stock we have traded in the past. That stock is Apache Corp (APA).
APA is trading about $1 to the downside as I write this, at just above $43.
My suggestion is going to be an uneven strangle.
I suggest going out the July expiration. This gives us about one month for the stock to make a move.
Buy to Open (4) July $45 call @ $1.40
Buy to Open (8) July $42.50 put @ $1.75
As you can see, we are doubling up on the shortside. But, I suggest a few contracts on the longside in the event that the XLE turns and takes out the upper band.
The suggested trade size is for the nominal portfolio of $100,000 and in total works out to just under a 2% risk.