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Juniper Networks, Inc. (NASDAQ: JNPR) shares are trading higher this morning as tech stocks are rebounding from recent losses. Some analysts felt the industry had a pull-back coming simply because those stocks had been safe havens throughout much of the financial sector's woes. Today, positive movement by Microsoft (NASDAQ: MSFT), Cisco (NASDAQ: CSCO) and Oracle (NASDAQ: ORCL) indicates that the mini-correction could be through. 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 JNPR.After hitting a one-year high of $37.95 in October, the stock has declined over the past month. JNPR opened this morning at $30.05. So far today the stock has hit a low of $29.78 and a high of $30.35. As of 11:05, JNPR is trading at $30.19, up $0.50 (1.7%). The chart for JNPR looks neutral and deteriorating, while S&P gives the stock a negative 2 STARS (out of 5) sell rating.
For a bullish hedged play on this stock, I would consider a December 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. This particular trade will make an 8.7% return in just 6 weeks as long as JNPR is above $25 at December expiration. Juniper would have to fall by more than 17% before we would start to lose money.
JNPR hasn't been below $25 since July and has shown support around $29.50 recently. This trade could be risky if the company's recent slide continues, but even if that happens, this position could be protected by support the stock formed around $30 in July and August. Plus, JNPR is not due to report earnings again until January, which is well after this position expires.
Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in JNPR or CSCO. He does control bullish positions in ORCL and MSFT.
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