3M (NYSE: MMM - option chain) shares are rising today after the company reported a second-quarter profit this morning of $783 million or $1.12 per share. Excluding one-time items, MMM earned $1.20 per share, easily beating analysts' forecasts of 94 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 MMM.MMM opened this morning at $66.58. So far today the stock has hit a low of $66.35 and a high of $68.67. As of 12:10, MMM is trading at $68.29 up $3.62 (5.6%). The chart for MMM looks bullish and S&P gives MMM a positive 4 STARS (out of 5) buy ranking.
For a bullish hedged play on this stock, I would consider a January bull-put credit spread below the $55 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 six months as long as MMM is above $55 at January expiration. MMM would have to fall by more than 19% before we would start to lose money. Learn more about this type of trade here.
MMM has not been below $40 since April and has shown support around $58 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 MMM.
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