EMC extends agreement with IBM

EMC Corporation (NYSE: EMC) opened at $18.87. So far today the stock has hit a low of $18.53 and a high of $18.88. As of 10:55, EMC is trading at $18.69, up $0.18 (1.0%).

The company announced today that it has extended a licensing agreement with IBM (NYSE: IBM) that will allow IBM to continue using EMC technology in its System z products. Technical indicators for EMC are bullish but deteriorating, while S&P gives the stock a very positive 5 STARS (out of 5) strong buy rating.

For a bullish hedged play on this stock, I would consider a September bull-put credit spread below the $17 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk and leverage returns. For this particular trade, we will make a 11.1% return in just 2 months as long as EMC is above $17.00 at September expiration. EMC would have to fall by more than 8% before we would start to lose money.

EMC has been steadily rising over the past year and hasn't been below $17 since early June. The stock has shown support around $18.00 recently. This trade could be risky if EMC has broken its upward trend in the past two weeks, but even if that happens, this stock could find support right around $18 where it bounced off its 50 day moving average.

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 EMC or IBM.