M&T Bank (NYSE: MTB - option chain) shares are rising today after the company reported Q2 earnings this morning. While Q2 profits fell by 75% year-over-year due to one-time charges, adjusted earnings came in at 0.79 per share, well above analyst estimates of 0.47. 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 MTB.MTB opened this morning at $56.76. So far today the stock has hit a low of $55.04 and a high of $60.00. As of 11:40, MTB is trading at $56.88 up 2.44 (4.5%). The chart for MTB looks bearish and S&P gives MTB a negative 2 STARS (out of 5) sell ranking.
For a bullish hedged play on this stock, I would consider an October bull-put credit spread below the $40 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 9.9% return in just three months as long as MTB is above $6 at October expiration. MTB would have to fall by more than 30% before we would start to lose money. Learn more about this type of trade here.
MTB has not been below $40 since March and has shown support around $51 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 MTB.
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