Sina Corp. (NASDAQ: SINA - option chain) stock is falling today after the Chinese internet portal company reported Q1 earnings of $9.75 million, or 17 cents per share against estimates of 22 cents. SINA also forecast second-quarter revenue of $85 to $89 million. Analysts are forecasting revenue of $91.5 million for the quarter. 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 SINA.
This morning, SINA opened at $30.13. So far today the stock has hit a low of $29.92 and a high of $31.30. As of 11:00, SINA is trading at $30.46, down $2.47 (-7.5%). The chart for SINA looks bullish.
For a bearish hedged play on this stock, I would consider a July bear-call credit spread above the $37.50 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 leverages nice returns. For this particular trade, we will make an 8.7% return in five weeks as long as SINA is below $37.50 at July expiration. SINA would have to rise by more than 23% before we would start to lose money. Learn more about this type of trade here.
SINA hasn't been above $37.50 since September and has shown resistance around $33 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 SINA.
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