Nokia (NOK) still reeling from battery problem

Nokia Corp. (NYSE: NOK) opened at $29.25. So far today the stock has hit a low of $29.25 and a high of $29.59. As of 11:05, NOK is trading at $29.39, down $0.45 (-1.5%).

The company announced yesterday that it will be replacing batteries in customers' phones after receiving approximately 100 complaints of overheating from a batch of 46 million batteries. NOK fell yesterday on the news and is continuing its slide today. Technical indicators for NOK are bullish but deteriorating, 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 an October bear-call credit spread above the $35 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 2 months as long as NOK is below $35 at October expiration. NOK would have to rise by 19% before we would start to lose money.

NOK has not been above $30 since the late days of the tech boom (and bust) and has shown some resistance around $31 recently. This trade could be risky if Nokia's earnings (due out in October just before expiration) are a positive surprise, but even if that happens, this stock looks like it is flattening out near $30.

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 NOK.