Nokia (NOK) launches new service and soars

Nokia Corp. (NYSE: NOK) has reached a new one-year high today after launching the new Ovi brand, which offers a range of internet services to Nokia-compatible mobile devices. If you think this means good times for the company, then now could be a good time to look at a bullish hedged trade on NOK.

NOK opened this morning at $31.47. So far today the stock has hit a low of $31.43 and a high of $31.82. As of 10:55, NOK is trading at $31.79, up $1.78 (6.0%). The chart for NOK looks bullish but deteriorating, 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 a January bull-put credit spread below the $25 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 8.7% return in just 5 months as long as NOK is above $25 at December expiration. Nokia would have to fall by more than 21% before we would start to lose money.

NOK hasn't been below $25 since May and has shown support around $29.80 recently. This trade could be risky if the company's earnings (due on 10/18/07) disappoint, but even if that happens, this position could be protected by historical support around $27, plus the 200 day moving average is just under $25 and rising.

Brent Archer is an options analyst and writer at Investors Observer. DISCLOSURE: At publication time, Brent neither owns nor controls positions in NOK.