Iron Mountain (NYSE: IRM - option chain) shares have moved higher today after the stock was added to the Standard & Poor's S&P 500 index. IRM is replacing UST Inc. (NYSE: UST), which was bought out by Altria Group (NYSE: MO). This usually causes a surge in stock value as all the ETFs that track the S&P 500 now have to rush to add IRM positions. 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 IRM.
IRM opened this morning at $21.45. As of this writing, the stock has hit a low of $21.40 and a high of $37.24. As of 12:45, IRM is trading at $22.99, up $3.16 (15.9%). The chart for IRM looks neutral and S&P gives IRM a 3 STARS (out of 5) hold ranking.
For a bullish hedged play on this stock, I would consider an April 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 an 8.7% return in just four months as long as IRM is above $15 at April expiration. Iron Mountain would have to fall by more than 34% before we would start to lose money.
IRM hasn't been below $16 at all in the past year and has shown support around $19.50 recently.
Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in IRM.
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Reader Comments (Page 1 of 1)
1-05-2009 @ 3:41PM
Hoover said...
Iron Mountain Inc. rose 13,41 percent to $22.49, the biggest gain in its 12-year history as a public company. The world's largest seller of records-management services.
The only sector that does not fear the crisis is that of data backup. In a recent study (1), IDC believes that "the volume of information created, captured and replicated should sixfold by 2010 to reach a global total of 988 exabytes.
Iron Mountain is the world leader.Last summer, rumors circulate about a possible acquisition of Europe's leading data backup Risc Group.Challenges ahead are very important as strengthening the legal and economic pressures led to the explosion of volumes of digital data for companies large and small sizes.