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Ingersoll Rand (NYSE: IR - option chain) shares are up more than 10% today after the company reported second-quarter earnings of $122.1 million, or 38 cents per share. Excluding restructuring costs, IR earned 50 cents per share, beating analysts' forecasts of 39 cents per share, which could signal a full-fledged economic recovery is underway. 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 IR.IR opened this morning at $25.35. So far today the stock has hit a low of $25.35 and a high of $27.21. As of 11:40, IR is trading at $26.98 up $2.90 (12.4%). The chart for IR looks bullish and S&P gives IR a positive 4 STARS (out of 5) buy ranking.
For a bullish hedged play on this stock, I would consider a December bull-put credit spread below the $20 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 an 11.1% return in five months as long as IR is above $20 at December expiration. IR would have to fall by more than 25% before we would start to lose money. Learn more about this type of trade here.
IR has not been below $19.48 since April and has shown support around $20 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 IR.
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