Zumiez (ZUMZ) soars on strong sales increase

Zumiez, Inc. (NASDAQ: ZUMZ) shares are trading higher today on stronger overall sales despite a disappointing same-store sales reading. The company reported a 3% decline in March same-store sales, worse than the 2.9% decline predicted by analysts. However, total sales increased by 11%. 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 ZUMZ.

After hitting a one-year high of $53.99 in October, the stock hit a one-year low of $13.26 in March. ZUMZ opened this morning at $17.74. So far today the stock has hit a low of $17.37 and a high of $18.77. As of 12:35, ZUMZ is trading at $18.20, up 1.66 (10.0%). The chart for ZUMZ is bullish and deteriorating slightly.

For a bullish hedged play on this stock, I would consider an August bull-put credit spread below the $12.50 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 9.9% return in just four months as long as ZUMZ is above $12.50 at August expiration. Zumiez would have to fall by more than 33% before we would start to lose money. Learn more about this type of trade here.

ZUMZ hasn't been below $13 at all in the past year and has shown support around $16 recently. This trade could be risky if the US economy continues to decline, but even if that happens, that position could be protected by support the stock might find around $15, where it bottomed out over the past month.

Brent Archer is an options analyst and writer at Investors Observer.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in ZUMZ.