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.
SNAP bounced up today and is trading about $15.25.
Ordinarily, I would just let the $16.50 calls expire today, as they are about $1 out of the money.
But, SNAP does report on Tuesday of next week and because of that fact, next week's calls carry an implied volatility of around 120%.
We could wait until Monday to do this trade, but I want to take advantage of premium erosion over the weekend.
So, my suggestion today is to Buy to Close the November 3rd-$16.50 calls for one cent. You may have to pay 2 cents. I don't suggest you leave them open, unless you are experienced and you understand the risk. And for a penny or two, you can close the position.
After you close this week's calls, then Sell to Open (1) November 10th - $15.50 call for every 100 shares you own.
The November 10th - $15.50 calls are quoted at $.95 to $.99. You should be able to sell them for $.96.
After you complete the trades, it will mean you will have collected $2.79 per share in call premium on the SNAP position, assuming you followed all the alerts.
