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OptionsXpress (NASDAQ: OXPS) shares are trading higher today after the company announced it will acquire Open E Cry LLC for $18 million in cash and stock. Open E Cry is a high-volume futures broker. 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 OXPS.After hitting a one-year high of $34.95 in December, the stock hit a one-year low of $18.55 in March. OXPS opened this morning at $22.57. So far today the stock has hit a low of $22.52 and a high of $23.46. As of 12:15, OXPS is trading at $23.19, up $0.62 (2.7%). The chart for OXPS looks bullish and steady, while S&P gives the stock a bullish 4 Stars (out of 5) Buy rating.
For a bullish hedged play on this stock, I would consider an August bull-put credit spread below the $20 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 two months as long as OXPS is above $20 at August expiration. OXPS would have to fall by more than 14% before we would start to lose money. Learn more about this type of trade here.
OXPS hasn't been below $20 for more than a few days in the past year and has shown support around $60 recently. This trade could be risky if the company's earnings (due out in mid-July) disappoint, but even if that happens, this position could be protected by the support the stock might find just below $20, where it bottomed out twice this spring.
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 OXPS.
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