AMR opened this morning at $5.68. So far today the stock has hit a low of $5.55 and a high of $5.70. As of 11:50, AMR is trading at $5.57 up 13 cents(2.4%). The chart for AMR looks neutral and S&P gives AMR a neutral 3 STARS (out of 5) hold ranking.
For a bullish hedged play on this stock, I would consider a February bull-put credit spread below the $4 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 25.0% return in four months as long as AMR is above $4 at February expiration. AMR would have to fall by more than 28% before we would start to lose money. Learn more about this type of trade here.
AMR has not been below $3.75 -- which is the break-even point on this trade -- since April and has shown support around $5.30 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 any airline stocks, including those mentioned.