Anadarko Petroleum (NYSE: APC - option chain) stock is trading lower today the company said a well off the coast of the Ivory Coast revealed no hydrocarbons. APC had drilled to a total depth of approximately 14,900 feet in about 6,100 feet of water. Even a lift in crude oil prices to another year high is not enough to keep APC from falling 5% on this news. 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 APC.This morning, APC opened at $65.58. So far today the stock has hit a high of $67.20 and a low of $64.85. As of 11:45, APC is trading at $65.62, down $3.74 (-5.4%). The chart for APC looks neutral and S&P gives APC 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 $85 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 one month as long as APC is below $85 at November expiration. Anadarko would have to rise by more than 29% before we would start to lose money. Learn more about this type of trade here.
APC hasn't been above $70 at all in the past year and shown resistance around $69 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 APC.
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