AutoZone (AZO) Q4 earnings solid if unexciting

AutoZone (NYSE: AZO - option chain) shares opened higher this morning, but are virtually unchanged as of midday after the company reported fourth quarter earnings that missed estimated by 2 cents ($3.88 vs $3.90). Profits rose 12% year over year, including a 0.6% increase in same store sales, but this was partially attributed to a quarter that was one week longer. However, with the current shaky economy, this stock did pretty well, so it might be a safe place to invest. 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 AZO.

AZO opened this morning at $128.00. So far today the stock has hit a low of $127.69 and a high of $134.14. As of 12:20, AZO is trading at $131.00, up 21 cents (0.2%). The chart for AZO looks bullish and S&P gives AZO a 3 STARS (out of 5) hold ranking.

For a bullish hedged play on this stock, I would consider a December bull-put credit spread below the $100 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 5.3% return in three months as long as AZO is above $100 at December expiration. AutoZone would have to fall by more than 23% before we would start to lose money. Learn more about this type of trade here.

AZO hasn't been below $100 at all in the past year and has shown support around $115 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 AZO.