Estee Lauder (NYSE: EL - option chain) shares are higher today after the company reported a third-quarter profit of $27.2 million, or 14 cents per share. Excluding one-time items, EL earned 16 cents per share, easily beating analysts' estimates of 5 cents per share. 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 EL.EL opened this morning at $32.89. So far today the stock has hit a low of $32.57 and as of 11:35 is right at its high of $35.15, up $4.02 (12.9%). The chart for EL looks neutral and S&P gives EL a neutral 3 STARS (out of 5) hold ranking.
For a bullish hedged play on this stock, I would consider a July bull-put credit spread below the $25 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 a 5.3% return in just three months as long as EL is above $25 at July expiration. Estee Lauder would have to fall by more than 39% before we would start to lose money. Learn more about this type of trade here.
EL has shown support around $26 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 EL.
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