International Paper (IP) Q1 earnings miss estimates

International Paper Co. (NYSE: IP) shares are falling after the company posted an adjusted first-quarter profit of 41 cents per share, below analysts' predictions of 50 cents per share. IP was hurt by higher raw material costs during the quarter. 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 IP.

After hitting a one-year high of $41.57 in July, the stock hit a one-year low of $26.59 in March. This morning, IP opened at $26.44. So far today the stock has hit a low of $25.81 and a high of $26.88. As of 12:15, IP is trading at $25.96, down 1.35 (-4.8%). The chart for IP 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 July bear-call credit spread above the $30 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 4.2% return in three months as long as IP is below $30 at July expiration. IP would have to rise by more than 15% before we would start to lose money. Learn more about this type of trade here.