Oracle (NASDAQ: ORCL - option chain) shares have cruised higher today after the company announced its Q2 earnings yesterday after the close. While revenues were lower than anticipated due to the stronger dollar. However, ORCL managed to cut costs and raise margins to 46%, which is seen as pretty good news as the dollar is already starting to moderate since the recent Fed meeting. 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 ORCL.ORCL opened this morning at $17.44. So far today the stock has hit a low of $17.35 and a high of $18.16. As of 12:35 ORCL is trading at $17.91, up $1.30 (7.8%). The chart for ORCL looks bullish and S&P gives ORCL a positive 5 STARS (out of 5) strong buy ranking.
For a bullish hedged play on this stock, I would consider a March bull-put credit spread below the $15 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 14.3% return in just three months as long as ORCL is above $15 at March expiration. Oracle would have to fall by more than 16% before we would start to lose money. Learn more about this type of trade here.
ORCL hasn't been below $15 at all in the past year and has shown support around $16.50 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 owns and controls bullish hedged positions in ORCL.
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