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 would like to make a suggestion on a stock that I suggested in the past, but the structure will be a bit different.
The stock is Xilinx, Inc. (XLNX).
The structure I am going to recommend is an uneven straddle using the front week options. And the trade will be structured with a bullish bias.
XLNX is trading around $95 as I write this.
The structure will be an uneven strangle, with a bullish bias.
Here is the trade ...
Buy to open (4) November 15th - $95.00 call for $1.35
Buy to open (2) November 15th - $95.00 puts for $1.38
Based on the position size I suggest, the overall risk is 0.8% of the tracking portfolio.
If you trade a different size position, keep the ratio of calls to puts to 2 to 1.
Also limit to less than 1% of your total portfolio when trading front week options.
