Wachovia Corp. (NYSE: WB) stock was trading lower this morning after competing banking and financial services provider UBS (NYSE: UBS) posted a fourth-quarter loss of $11.22 billion. UBS was hit hard by write-downs totaling $18.4 billion over the past year, and expects the pain from the subprime mortgage crisis to continue into 2008, which could be a bad sign for WB. 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 WB.

After hitting a one-year high of $58.80 last February, the stock hit a one-year low of $28.41 last month. This morning, WB opened at $34.95. So far today the stock has hit a low of $33.92 and a high of $34.95. As of 10:50, WB is trading at $33.98, down $1.07 (-3.0%). The chart for WB looks neutral and improving, 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 March bear-call credit spread above the $40 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 an 8.7% return in 5 weeks as long as WB is below $40 at March expiration. Wachovia would have to rise by more than 18% before we would start to lose money.

WB hasn't been above $40 since December and has shown resistance around $35.50 recently. This trade could be risky if the economy bounces back strongly, but even if that happens, this position could be protected by resistance the stock found around $39 earlier this month.

Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in WB or UBS.