Cooper Companies (NYSE: COO - option chain) stock is trading lower today after the company reported earnings last night, posting a third-quarter profit of $21.91 million, or 48 cents per share. Excluding one-time items, COO earned 54 cents per share, missing analysts' estimates of 62 cents per share. COO also lowered its 2009 guidance below analysts' forecasts. 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 COO.This morning, COO opened at $25.58. So far today the stock has hit a low of $23.55 and a high of $25.70. As of 11:45, COO is trading at $25.15, down $1.52 (-5.7%). The chart for COO looks neutral and S&P gives COO 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 $30 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 a 5.3% return in two and a half months as long as COO is below $30 November expiration. Cooper would have to rise by more than 19% before we would start to lose money. Learn more about this type of trade here.
COO hasn't been above $30 at all since June and shown resistance around $29.50 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 COO.
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