Weatherford International (NYSE: WFT - option chain) stock is lower today after the company reported a first-quarter profit of $164.80 million, or 23 cents per share. Excluding one-time items, WFT earned 27 cents per share, missing analysts' projections of 29 cents per share. Also helping to keep WFT in the red are crude oil prices that are down more than 7%, now well below $50. 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 WFT.This morning, WFT opened at $13.69. So far today the stock has hit a low of $13.43 and a high of $14.24. As of 11:40, WFT is trading at $14.10, down 65 cents (-4.4%). The chart for WFT looks bullish and S&P gives WFT a positive 4 STARS (out of 5) buy ranking.
For a bearish hedged play on this stock, I would consider an August bear-call credit spread above the $20 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 an 8.7% return in three months as long as WFT is below $20 at August expiration. Weatherford would have to rise by more than 39% before we would start to lose money. Learn more about this type of trade here.
WFT hasn't been above $30 since October and shown resistance 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 WFT.
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