Boston Properties (BXP) drops on share offering

Posted Jun 5th 2009 2:30PM by Brent Archer
Filed under: Major Movement, Bad News, Options, Technical Analysis

Boston Properties (NYSE: BXP - option chain) stock is falling today after the company announced an offering of 15 million common shares priced at $50 per share. This action will probably place a ceiling on this stock around $50 for the short-term. 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 BXP.

This morning, BXP opened at $50.64. So far today the stock has hit a low of $49.80 and a high of $51.22. As of 12:30, BXP is trading at $50.92, down $2.09 (-3.9%). The chart for BXP looks neutral and S&P gives BXP 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 $60 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 7.3% return in six weeks as long as BXP is below $60 at June expiration. BXP would have to rise by more than 17% before we would start to lose money. Learn more about this type of trade here.

BXP hasn't been above $60 since December and shown resistance around $53 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 BXP.

Tags: boston properties, BostonProperties, BXP, inthenews, Investors Observer, InvestorsObserver, options, share offering, ShareOffering