J. Crew Group (NYSE: JCG - option chain) shares are rising today after the company lifted its third-quarter EPS forecast by 80% to a range of 54 to 59 cents, up from a previous range of 30 to 33 cents. Analysts are expecting the company to report a profit of 36 cents per share. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on JCG.JCG opened this morning at $42.57. So far today the stock has hit a low of $41.50 and a high of $42.94. As of 11:50, JCG is trading at $42.41 up $4.67 (12.4%). The chart for JCG looks neutral and S&P gives JCG a neutral 3 STARS (out of 5) hold ranking.
For a bullish hedged play on this stock, I would consider a December bull-put credit spread below the $32.50 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 5.3% return in two months as long as JCG is above $32.50 at December expiration. J. Crew would have to fall by more than 17% before we would start to lose money. Learn more about this type of trade here.
JCG has not been below $32.50 since early September and has shown support around $35 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 JCG.
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