Allstate Corp. (NYSE: ALL) opened at $60.40. So far today the stock has hit a low of $59.00 and a high of $60.49. As of 11:00 this morning, ALL is trading at $59.67, down $0.89 (-1.5%).

After hitting a one year high of $66.14 in December, the stock has been trading slightly lower over the past six months, with support just below $60. The stock is testing that support today, as shares fall in the wake of a weaker-than-expected earnings report. The company reported earnings per share of $1.76, a tick below the $1.80 expected by Wall Street analysts, citing declining homeowner premiums for the fall. Technical indicators for ALL are bearish and steady, while S&P gives the stock a very positive 5 STARS (out of 5) strong buy rating.

For a bearish hedged play on this stock, I would consider an October bear-call credit spread above the $65 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk and leverage returns. For this particular trade, we will make a 13.6% return in just 3 months as long as ALL is below $65 at October expiration. ALL would have to rise by 8% before we would start to lose money.

ALL has never been above $65 except for a few days in December and has shown resistance around $62 recently. This trade could be risky if the company's earnings turn out to be better than they seem after closer study, but even if that happens, this stock could have trouble getting over $64, where it topped out in April and May.

Brent Archer is an options analyst and writer at Investors Observer. DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in ALL.