Chevron (NYSE: CVX - option chain) stock is falling today after the company warned Thursday after market close that its first-quarter earnings will be lower than previous quarters, due to a weaker dollar and lower oil prices during the period. CVX reports earnings on May 1. Also, not helping are crude oil futures, which are sliding by more than 5% on the session after the International Energy Agency forecast slowing demand. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on CVX.This morning, CVX opened at $67.45. So far today the stock has hit a low of $66.52 and a high of $67.74. As of 11:40, CVX is trading at $67.17, down $2.06 (-3.0%). The chart for CVX looks bullish and S&P gives CVX a positive 5 STARS (out of 5) strong buy ranking.
For a bearish hedged play on this stock, I would consider a June bear-call credit spread above the $80 range. A bear-call credit spread is an options position that combines the purchase and 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 a 6.4% return in two months as long as CVX is below $80 at June expiration. Chevron would have to rise by more than 19% before we would start to lose money. Learn more about this type of trade here.
CVX hasn't been above $80 since December and shown resistance around $71 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 CVX.
CVX hasn't been above $80 since December and shown resistance around $71 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 CVX.
Nuclear power is on the comeback trail
Apple backs AT&T in continuing spat with Verizon
Closing Bell: The recession is still over, still... do you feel it?
