Capital One Financial Corp. (NYSE: COF) stock is falling this morning after the credit-card company said today that its 2007 earnings will not meet previous estimates, citing increased loan delinquencies and additional legal reserves in the fourth quarter. The company said it will take a $1.9 billion provision for loan losses in the fourth quarter, raising fears that the subprime mortgage crisis has hurt other credit classes. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on COF.

After hitting a one-year high of $83.84 in February, the stock hit a one-year low of $41.23 yesterday, which it has broken this morning. This morning, COF opened at $40.42. So far today the stock has hit a low of $38.85 and a high of $41.71. As of 10:45, COF is trading at $41.04, down $2.37 (-5.5%). The chart for COF looks bearish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bearish hedged play on this stock, I would consider a February bear-call credit spread above the $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 7.5% return in 5 weeks as long as COF is below $50 at February expiration. capital One would have to rise by more than 22% before we would start to lose money.