Dow Chemical Co. (NYSE: DOW) shares are trading higher today after Dow Corning Corp, the joint venture between Dow Chemical and Corning (NYSE: GLW), reported Q3 earnings of $162.7 million, 4% higher than the year-ago figure, with sales coming in 9% higher year-over-year. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on DOW.

After hitting a one-year high of $47.96 in July, the stock quickly fell to a one-year low of $38.89 a month later. DOW opened this morning at $43.50. So far today the stock has hit a low of $43.44 and a high of $44.24. As of 10:55, DOW is trading at $43.90, up 24 cents (0.5%). The chart for DOW looks bullish 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 a December 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 7.5% return in just 2 months as long as DOW is above $40 at December expiration. Dow would have to fall by more than 8% before we would start to lose money. Learn more about this type of trade here.

DOW hasn't been below $40 by more than a few cents since January and has shown support around $44 recently. This trade could be risky if the economy continues to grow weaker and slow demand for industrial goods, but even if it happens, this position could be protected by strong support the stock found around $40 where it bounced back in August

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 DOW or GLW.

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