Mattel Inc. (NYSE: MAT) opened at $22.60. So far today the stock has hit a low of $22.10 and a high of $23.14. As of 10:40, MAT is trading at $22.73, down 0.84 (-3.6%).After hitting a one year high of 29.71 in April, the stock has been sliding over the past few months. Shares are dipping more still today after the toymaker announced that it is recalling an additional 8.8 million Chinese-made toys on lead paint concerns. With trouble like this and potentially more on the way, its hard to imagine this stock going up by too much over the next few months. Technical indicators for MAT are bearish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bearish hedged play on this stock, I would consider a January bear-call credit spread above the $30 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 4.2% return in just 5 months as long as MAT is below $30 at January expiration. MAT would have to rise by 31% before we would start to lose money. Learn more about trades like this one here.
MAT has not been above $30 since the late 1990s and has shown some resistance around $23 recently. This trade could be risky if retail has a good second half to this year, but current economic indicators are pointing away from that possibility.
Brent Archer is an options analyst and writer at Investors Observer.
Click here for Mattel toy recall news
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