General Electric (GE) hurt by jobs data

General Electric Co. (NYSE: GE) is slipping with the broader market this morning following this month's jobs report, which showed that payrolls in August fell for the first time in four years, rather than rising as had been expected. Due to its diverse nature, broad economic reports like this one bode poorly for GE. If you think the stock won't rise by too much in the coming months on the heels of this report, then now could be a good time to look at a bearish hedged trade on GE.

After hitting a one-year high of $40.98 in July, the stock has cooled some over the past six weeks. This morning, GE opened at $38.91. So far today the stock has hit a low of $38.61 and a high of $39.00. As of 10:50, GE is trading at $38.86, down $0.55 (-1.4%). The chart for GE looks neutral and deteriorating, while S&P gives the stock a very positive 5 STARS (out of 5) strong buy rating.

For a bearish hedged play on this stock, I would consider a December bear-call credit spread above the $42.50 range. A bear-call credit spread is an options position that combines the purchase and sale of call 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 16.3% return in three and a half months as long as GE is below $42.50 at December expiration. General Electric would have to rise by more than 9% before we would start to lose money.

GE has not been above $42.50 since the tech bubble and has shown some resistance around $40 recently. This trade could be risky if the economic news gets better soon, but even if that happens, this position could be protected by resistance formed around $41 when the stock topped back in July.

Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: At publication time, Brent controls a bullish hedged position in GE. Both this position and the one above can expire profitably at the same time.