Coach (NYSE: COH - option chain) shares are headed higher today after the company reported a third-quarter adjusted profit of 38 cents per share this morning, above analysts' estimates of 36 cents per share. However, the even bigger news is that the company announced it will begin paying a quarterly dividend of 7.5 cents per share on June 29. That is a pretty bold statement in this environment. 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 COH.COH opened this morning at $20.18. So far today the stock has hit a low of $20.76 and a high of $21.62. As of 11:20, COH is trading at $20.76, up 2.53 (13.9%). The chart for COH looks bullish and S&P gives COH a positive 5 STARS (out of 5) strong buy ranking.
For a bullish hedged play on this stock, I would consider a June bull-put credit spread below the $16 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 two months as long as UPS is above $16 at June expiration. COH would have to fall by more than 22% before we would start to lose money. Learn more about this type of trade here.
COH hasn't been below $16 in the past month and has shown support around $17.80 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 COH.
COH hasn't been below $16 in the past month and has shown support around $17.80 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 COH.
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