Abercrombie & Fitch (ANF) rises despite lackluster same-store sales

Abercrombie & Fitch Co. (NYSE: ANF) shares opened lower this morning after the retailer posted a 10% drop in March same-store sales. Analysts had been expecting a drop of 4.5%. However, the stock is trading higher now as positive results from other retail outlets like Aeropostale (NYSE: ARO) have encouraged the markets. If you think that the stock 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 ANF.

After hitting a one-year high of $85.77 in October, the stock hit a one-year low of $66.05 in January. ANF opened this morning at $72.65. So far today the stock has hit a low of $72.36 and a high of $75.89. As of 12:50, ANF is trading at $74.81, up 0.79 (1.1%). The chart for ANF looks bearish and steady, while S&P gives the stock its highest 5 STARS (out of 5) strong buy rating.

For a bullish hedged play on this stock, I would consider a May bull-put credit spread below the $65 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 9.9% return in just five weeks as long as ANF is above $65 at May expiration. Abercrombie would have to fall by more than 13% before we would start to lose money. Learn more about this type of trade here.