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Public Storage (NYSE: PSA - option chain) shares are headed higher today after the company reported a fourth-quarter profit of $151.7 million after the close yesterday. PSA's funds from operations of $1.49 per share beat analysts' projections of $1.28 per share. This industry has been one of my favorites for a while as it addresses Americans' dual compulsions to buy stuff and never get rid of it. Plus, their business model is pretty nice -- they charge a whole lot of cash just store your junk in a garage that cost them very little to build and maintain. 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 PSA.
PSA opened this morning at $51.45. So far today the stock has hit a low of $51.06 and a high of $56.32. As of 11:50, PSA is trading at $56.53, up $4.10 (7.8%). The chart for PSA looks neutral and S&P gives PSA a 3 STARS (out of 5) hold ranking.
For a bullish hedged play on this stock, I would consider a June bull-put credit spread below the $30 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 9.9% return in just four months as long as PSA is above $30 at June expiration. PSA would have to fall by more than 46% before we would start to lose money. Learn more about this type of trade here.
PSA hasn't been below $49 at all in the past year and has shown support around $51 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 PSA.
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