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Corning (NYSE: GLW - option chain) stock is falling today after the company said that an earthquake in Honshu yesterday disrupted production at its LCD glass manufacturing facility in Shizuoka, Japan. GLW expects the earthquake to reduce third-quarter revenue by up to $65 million. 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 GLW.
This morning, GLW opened at $16.08. So far today the stock has hit a low of $15.80 and a high of $16.15. As of 11:25, GLW is trading at $15.94, down $0.44 (-2.7%). The chart for GLW looks neutral and S&P gives GLW a neutral 3 STARS (out of 5) hold ranking.
For a bearish hedged play on this stock, I would consider a November bear-call credit spread above the $19 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 11.1% return in three and a half months as long as GLW is below $19 at November expiration. Corning would have to rise by more than 19% before we would start to lose money.
GLW hasn't been above $19 since September and has shown resistance around $17.20 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 GLW.
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