Walgreen Co. (NYSE: WAG - option chain) shares have moved higher today after the company reported December sales that rose upwards of 10%, including a 4.9% gain in same store sales. In times like these, WAG stayed strong with sales of basic necessities, while seasonal items slumped, but the net result was positive. 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 WAG.WAG opened this morning at $25.43. So far today the stock has hit a low of $25.43 and a high of $26.78. As of 12:15, WAG is trading at $26.80, up $1.25 (4.9%). The chart for WAG looks neutral and S&P gives WAG 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 $20 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 and a half months as long as WAG is above $20 at April expiration. Walgreen would have to fall by more than 25% before we would start to lose money. Learn more about this type of trade here.
WAG hasn't been below $21 at all in the past year and has shown support around $22.50 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 neither owns nor controls positions in WAG.
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Reader Comments (Page 1 of 1)
1-12-2009 @ 12:39AM
adam hartung said...
Best Buy, Walgreen, Sears - all had a great past. But none are prepared to compete in the new market requirements. Lacking internal Disruption and White Space, they are not going to grow, or succeed. Sears is likely to fail. And new competitors will most likely reap the benefit of shifting markets. Read more at http://www.ThePhoenixPrinciple.com