April 13, 2016 - MDT Alert (VRTX)

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 a pharmaceutical company.
That company is Vertex Pharmaceuticals Inc. (VRTX).

The stock is trading around $84 as I write this and it appears like
it is finding support.

Though it does have weeklies, I am not going to suggest trading
the weeklies. I would like to buy a bit more time to be right.

The biggest negative to their options is that they do have a wide
spread, therefore I am not going to suggest an outright directional trade.

I am going to recommend you put it on as a debit spread.

Here is my suggestion ...

Buy to Open May 20th - $85 call for $5.50

Sell to Open May 20th - $90 call for $3.60

The net debit is $1.90, with a maximum return of $5.00.

Because they are thinly traded, do not pay more than $2.10 for the spread.

My suggestion is to limit it to a 5 lot or about $1,000.? Based on the
nominal portfolio, it is a risk of 1%.

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