Brinker International (NYSE: EAT - option chain) shares are headed higher today after the company forecast third-quarter earnings of 44 to 45 cents per share, well above analysts' estimates of 29 cents per share. 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 EAT.EAT opened this morning at $18.14. So far today the stock has hit a low of $16.93 and a high of $18.20. As of 11:25, EAT is trading at $17.20, up 0.95 (5.8%). The chart for EAT looks bearish and S&P gives EAT 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 $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 an 11.1% return in just three months as long as EAT is above $10 at July expiration. Brinker would have to fall by more than 41% before we would start to lose money. Learn more about this type of trade here.
EAT hasn't been below $10 since early March 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 EAT.
EAT hasn't been below $10 since early March 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 EAT.
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