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Waste Management (NYSE: WMI - option chain) announced its earnings yesterday and dropped almost 5% on the report, but also sneaked in a little tidbit that I find amusing. WMI declared that as of 8/5, it will trade on the NYSE as WM, which until earlier this year designated Washington Mutual. How appropriate that a company that specializes in, um... waste management, has collected this trashed ticker from the curb and will recycle it for its own purposes.WMI CEO David Steiner did not mention that connection in the company's announcement, instead saying,"From our trucks to our uniforms, the very recognizable WM represents our company and our people. The WM symbol reinforces how customers, communities and shareholders have come to think of us over the past years, and aligns our branding with our stock symbol." I guess that makes sense it you picture a green Waste Management truck or the logo attached to this post, but I imagine the board members considering the change and relishing how apt it would be.
As for the stock itself, yesterday's earnings came in a penny below expectations and guided downwards for the rest of the year, but this business is not going away any time soon. Also, yesterday's stock dip could have been the result of raised expectations, as WMI had been rising steadily for almost all of July. 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 WMI.
For a bullish hedged play on this stock, I would consider an October bull-put credit spread below the $25 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 8.7% return in three months as long as WMI is above $25 at October expiration. WMI would have to fall by more than 11% before we would start to lose money. Learn more about this type of trade here.
WMI has not been below $25 since March and has shown support around $26 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 controls bullish hedged positions in WMI.
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