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Sina (NASDAQ: SINA - option chain) shares are rising today after the company was upgraded by Deutsche Bank from Sell to Hold with a price target of $31. This action comes even though Deutsche thinks that Sina's deal for Focus Media Holdings (NASDAQ: FMCN) is getting more likely to fall through. 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 SINA.SINA opened this morning at $30.22. So far today the stock has hit a low of $30.09 and a high of $32.60. As of 11:35, SINA is trading at $32.42 up $2.42 (8.1%). The chart for SINA looks bullish.
For a bullish hedged play on this stock, I would consider an August bull-put credit spread below the $22.50 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 4.2% return in just two months as long as SINA is above $22.50 at August expiration. Sina would have to fall by more than 29% before we would start to lose money. Learn more about this type of trade here.
SINA has not been below $22.50 since March and has shown support around $29 recently. Just a few weeks ago, I looked at a bearish July hedged trade at $37.50 after SINA reported weak earnings. Both that position and the one in this post can be profitable at the same time as long as SINA is below $37.50 at July expiration and above $22.50 at August expiration.
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 or FMCN.
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