JPMorgan Chase & Co (NYSE: JPM) is higher this morning as most financial stocks and other stocks affected by the mortgage problems are rising this morning after news that President Bush will unveil a proposal to expand the role of the federal government to stem a wave of mortgage defaults. Fed Chairman Bernanke is also set to make a speech where investors hope he will mention or hint at upcoming rate cuts. If you think this action will help to buoy the troubled lending industry, then now could be a good time to look at a bullish hedged trade on JPM.

After hitting a one-year high of $53.25 in May, JPM shares fell sharply in July and August to hit a one-year low of $42.16 earlier this month. JPM opened this morning at $45.00. So far today the stock has hit a low of $44.28 and a high of $45.13. As of 10:40, JPM is trading at $44.62, up $0.65 (1.5%). The chart for JPM looks bearish but improving slightly, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.

For a bullish hedged play on this stock, I would consider a September bull-put credit spread below the $40 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 a 4.2% return in just three weeks as long as JPM is above $40 at September expiration. JPMorgan would have to fall by more than 10% before we would start to lose money.

JPM hasn't been below $40 at all in the past year and has shown support around $43 recently. This trade could be risky if the Fed decision discourages investors, but even if that happens, this position could be protected by strong support around $43, a price where investors have been buying JPM up to this point.

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