Walmart's New Health Food Push: Is It Too Hard to Swallow?
Bonds Are a 'Safe' Investment: A Big Lie Gets Even Bigger
Sears Holdings (NASDAQ: SHLD - option chain) shares have jumped higher today even after the company announced a Q3 loss that included slowing sales and falling margins. Earnings and revenues fell, but an extension of the company' s buyback plan is boosting the shares today, along with a positive outlook for the company's holiday layaway promotion. It might just be that investors expected even worse results from the beleaguered retailer. 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 SHLD.
SHLD opened this morning at $33.98. So far today the stock has hit a low of $31.55 and a high of $38.47. As of 12:20, SHLD is trading at $36.67, up $4.83 (15.2%). The chart for SHLD looks bearish and S&P gives SHLD a negative 2 STARS (out of 5) sell ranking.
For a bullish hedged play on this stock, I would consider a December bull-put credit spread below the $22.50 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 an 8.7% return in just three weeks as long as SHLD is above $22.50 at December expiration. Sears would have to fall by more than 38% before we would start to lose money. Learn more about this type of trade here.
SHLD hasn't been below $26 at all in the past year and has shown support around $30 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 SHLD.
Goldman Earnings Sink After Buffett Dividend
Johnson & Johnson's Income Falls 23%
Burberry Shares Leap on Sales Update
