Tata Motors (NYSE: TTM - option chain) shares are headed higher today as the company officially begins booking sales of its Nano today. The car has been called the world's cheapest automobile, and analysts are eagerly waiting to see how well the car sells in rapidly-growing India. 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 TTM.TTM opened this morning at $6.96. So far today the stock has hit a low of $6.95 and a high of $8.30. As of 11:45, TTM is trading at $7.65, up 1.01 (15.2%). The chart for TTM looks neutral and S&P gives TTM a 3 STARS (out of 5) hold ranking.
For a bullish hedged play on this stock, I would consider a July covered call at the $7.50 level. A covered call is an options position that combines the purchase of stock with the sale of call 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 16.5% return in just 3 months as long as TTM is above $7.50 at July expiration. Tata would have to fall by more than 15% before we would start to lose money. Learn more about this type of trade here.TTM has shown support around $6.50 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 TTM.
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Reader Comments (Page 1 of 1)
4-10-2009 @ 5:46PM
proud2bindian.in said...
I am proud to be an Indian