Brinker International (NYSE: EAT - option chain) stock is falling today after the company announced it has entered into a deal to open 25 Chili's Bar and Grill casual dining restaurants in Russia, starting with the first in late 2010. Traders are not reacting well to this news, but in my opinion a downturn is the best time to consider expansion if you can afford the costs. If you think this stock won't be falling too far in the coming months, then it could be a good time to look at a bullish hedged play on EAT.This morning, EAT opened at $13.85. So far today the stock has hit a low of $13.68 and a high of $13.97. As of 11:35, EAT is trading at $13.80, down 27 cents (-1.9%). The chart for EAT looks neutral and S&P gives EAT a neutral 3 STARS (out of 5) hold ranking.
For a bullish hedged play on this stock, I would consider a January bull-put credit spread above the $10 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 16.3% return in seven weeks as long as EAT is above $10 at January expiration. Brinker would have to fall by more than 27% before we would start to lose money. Learn more about this type of trade here.
EAT hasn't been below $10 since March and shown resistance around $13.50 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 EAT.
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