Allstate (ALL) rises as Ike damage is assessed

Allstate (NYSE: ALL - option chain) shares are rising today as early reports are showing that the damage from Hurricane Ike over the weekend was not as bad as feared. 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 ALL.

ALL opened this morning at $44.55. So far today the stock has hit a low of $44.21 and a high of $46.95. As of 12:15, ALL is trading at $45.98, up 75 cents(1.7%). The chart for ALL looks neutral and S&P gives ALL a 3 STARS (out of 5) hold ranking.

For a bullish hedged play on this stock, I would consider an October bull-put credit spread below the $42.50 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 five weeks as long as ALL is above $42.50 at October expiration. Allstate would have to fall by more than 7% before we would start to lose money. Learn more about this type of trade here.

ALL hasn't been below $42.50 at all in the past year and has shown support around $45 recently.

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 ALL.