Cramer touts Wells Fargo (WFC) as mortgage king

Wells Fargo & Co. (NYSE: WFC) opened at $37.04. So far today the stock has hit a low of $35.91 and a high of $37.99. As of 10:45, WFC is trading at $35.98, up 0.58 (1.7%).

After hitting a one year high of $36.99 in October, the stock has slipped down, hitting a year low of $32.66 earlier this month. In his Mad Money TV show Thursday evening, Jim Cramer singled out WFC as the most likely big winner of the financials, saying that "when the smoke clears, Wells Fargo will own the mortgage market." Add to that the company's great dividend, and this is a stock Cramer wants to buy on weakness in the next couple of weeks. The Fed's decision this morning looks like a strong move toward the clearing of the smoke, and WFC is jumping today following that news. Technical indicators for WFC are bearish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bullish hedged play on this stock, I would consider an October bull-put credit spread below the $32.50 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 an 11.1% return in just two months as long as WFC is above $32.50 at October expiration. WFC would have to fall by more than 9% before we would start to lose money. Learn more about this type of trade here.

WFC hasn't been below $32.50 at all in the past year and has shown support around $32.80 recently. This trade could be risky if the financial trouble is not over yet, but even if that happens, WFC could be protected by the historical support it found in July between $32 and $33.

Brent Archer is an options analyst and writer at Investors Observer.