NetApp (NASDAQ: NTAP - option chain) shares are headed higher today after the company announced it plans to cut 6 percent of its global work force in order to reduce costs. NTAP reported a loss of 23 cents per share, but excluding items made 28 cents, which was in line with estimates. 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 NTAP.NTAP opened this morning at $14.10. So far today the stock has hit a low of $14.07 and a high of $16.41. As of 11:55, NTAP is trading at $16.41, up $1.16 (7.6%). The chart for NTAP looks bearish and S&P gives NTAP a negative 2 STARS (out of 5) sell ranking.
For a bullish hedged play on this stock, I would consider a June bull-put credit spread below the $10 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 four months as long as NTAP is above $10 at June expiration. NetApp would have to fall by more than 38% before we would start to lose money. Learn more about this type of trade here.
NTAP hasn't been below $10 at all in the past year and has shown support around $15 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 NTAP.
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