Nissan Motors (NASDAQ: NSANY - option chain) shares have moved higher today on reports that the company will invest $1.1 billion to make lithium-ion batteries to be used in electric and hybrid cars. This outlay should account for batteries for 200,000 vehicles each year. 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 NSANY.NSANY opened this morning at $7.02. So far today the stock has hit a low of $6.90 and a high of $7.07. As of 12:50, NSANY is trading at $6.96, up 11 cents (1.6%). The chart for NSANY looks neutral and S&P gives NSANY a 3 STARS (out of 5) hold ranking.
For a bullish hedged play on this stock, I would consider a June covered call at the $7.50 level. A covered call is an options position that combines the purchase of stock with the sale of call 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 22.0% return in just 6 months as long as NSANY is above $7.50 at June expiration. Nissan would have to fall by more than 11% before we would start to lose money. Learn more about this type of trade here.
NSANY has only barely dipped below $6.15, which is this trade's break-even point, in the past year and has shown support around $6.80 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 NSANY.
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