Walmart's New Health Food Push: Is It Too Hard to Swallow?
Bonds Are a 'Safe' Investment: A Big Lie Gets Even Bigger
VeriSign (NASDAQ: VRSN - option chain) stock is falling today after the company reported earnings last night, posting a second-quarter profit of $34.87 million or 18 cents per share. Excluding items, VRSN earned 31 cents per share, missing analysts' estimates by a penny. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on VRSN.This morning, VRSN opened at $20.00. So far today the stock has hit a low of $18.64 and a high of $20.06. As of 11:45, VRSN is trading at $19.04, down $1.52 (-7.4%). The chart for VRSN looks bullish and S&P gives VRSN a positive 5 STARS (out of 5) strong buy ranking.
For a bearish hedged play on this stock, I would consider a December bear-call credit spread above the $25 range. A bear-call credit spread is an options position that combines the purchase and sale of call 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 four and a half months as long as VRSN is below $25 at December expiration. VeriSign would have to rise by more than 31% before we would start to lose money. Learn more about this type of trade here.
VRSN hasn't been above $25 since October and shown resistance around $21 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 VRSN.
Goldman Earnings Sink After Buffett Dividend
Johnson & Johnson's Income Falls 23%
Burberry Shares Leap on Sales Update
