Urban Outfitters (NASDAQ: URBN - option chain) shares are headed higher today after the company announced this morning same-store sales that fell 1 percent in January and fourth-quarter same-store sales that rose 3 percent. With so many retail outlets showing declining sales, investors are responding favorably to any gains and even some moderate declines in sales. 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 URBN.URBN opened this morning at $16.25. So far today the stock has hit a low of $16.09 and a high of $17.25. As of 12:35, URBN is trading at $16.65, up 89 cents (5.6%). The chart for URBN looks neutral and S&P gives URBN 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 $12.50 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 seven weeks as long as URBN is above $12.50 at March expiration. URBN would have to fall by more than 25% before we would start to lose money. Learn more about this type of trade here.
URBN hasn't been below $12.30 at all in the past year and has shown support around $14 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 URBN.
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