Clorox Co. (NYSE: CLX - option chain) shares are headed higher today after the company announced its second-quarter profit fell 7 percent to $86 million, or 62 cents per share, beating analysts' projections of 57 cents per share. CLX also reiterated their earnings guidance for 2009.Consumer staples have been one area of this market that have not been completely crushed recently, although Colgate-Palmolive (NYSE: CL) and CLX have fared significantly better than Procter & Gamble (NYSE: PG). 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 UPS.
CLX opened this morning at $53.00. So far today the stock has hit a low of $53.00 and a high of $54.94. As of 12:30, CLX is trading at $53.62, up $1.80 (3.5%). The chart for CLX looks neutral and S&P gives CLX a 3 STARS (out of 5) hold ranking.
For a bullish hedged play on this stock, I would consider a March bull-put credit spread below the $45 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 5.3% return in just six weeks as long as CLX is above $45 at March expiration. Clorox would have to fall by more than 16% before we would start to lose money. Learn more about this type of trade here.
CLX hasn't been below $47 at all in the past year and has shown support around $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 CLX. He does control bullish hedged positions in CL and PG.
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Reader Comments (Page 1 of 1)
2-04-2009 @ 3:15PM
ryan said...
CLX is hovering above 50 now. Sentiment is becoming bullish (http://www.predictwallstreet.com/forecast.aspx?symbol=CLX) which I believe will hold them above 50.