Career Education Corp. (NASDAQ: CECO - option chain) shares have jumped higher this morning after the company posted a fourth-quarter profit of $31.2 million, or 35 cents per share, easily beating analysts' projections of 20 cents per share. It seems that in this terrible economy, people might be taking the opportunity to go to a trade school to get training in a new field. 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 CECO.CECO opened this morning at $21.60. So far today the stock has hit a low of $20.14 and a high of $23.90. As of 12:00, CECO is trading at $23.54, up $3.88 (19.7%). The chart for CECO looks bearish and S&P gives CECO a negative 2 STARS (out of 5) sell ranking.
For a bullish hedged play on this stock, I would consider a July 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 a 7.5% return in just two and a half weeks as long as CECO is above $15 at July expiration. CECO would have to fall by more than 36% before we would start to lose money. Learn more about this type of trade here.
CECO hasn't been below $15 since November and has shown support around $17.50 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 CECO.
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