Newmont Mining posts great earnings

Newmont Mining Corp. (NYSE: NEM) stock is soaring to a new 52-week high today after the company's third quarter earnings release. Profit in the quarter doubled to $0.88 per share, obliterating analyst expectations of $0.25 per share profits. Even though gold futures are relatively flat today, prices have been rising recently, lifting the outlook for NEM. 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 NEM.

After hitting a one year low of $48.42 in the summer, the stock has risen quite a bit, settling in above the $45 mark with recent resistance around $48 until today. NEM opened this morning at $47.40. So far today the stock has hit a low of $47.14 and a high of $50.63. As of 10:45, NEM is trading at $50.53, up $4.09 (8.8%). The chart for NEM 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 $42.50 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 5.3% return in just 7 weeks as long as NEM is above $42.50 at December expiration. Newmont would have to fall by more than 15% before we would start to lose money.