Oshkosh Corp. (NYSE: OSK - option chain) stock is falling sharply today after the company announced it will suspend its quarterly dividend in order to preserve cash. Previously, OSK was yielding somewhere in the neighborhood of 3% annually. Today, OSK also released an adjusted Q2 loss of 0.24 per share (16.02 unadjusted), which was well worse that the expected 0.15 loss. 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 OSK.This morning, OSK opened at $11.37. So far today the stock has hit a low of $10.01 and a high of $11.37. As of 11:35, OSK is trading at $10.18, down $2.06 (-16.8%). The chart for OSK looks neutral and S&P gives OSK a neutral 3 STARS (out of 5) hold ranking.
For a bearish hedged play on this stock, I would consider a July bear-call credit spread above the $15 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 5.3% return in three months as long as OSK is below $15 at July expiration. Oshkosh would have to rise by more than 47% before we would start to lose money. Learn more about this type of trade here.
OSK hasn't been above $15 since September and shown resistance around $11.50 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 OSK.
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