Aeropostale (NYSE: ARO - option chain) stock is trading lower today after the company reported its same-store sales rose 3.0 percent in October, well below analysts' forecasts of 13.8 percent. 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 GE.This morning, ARO opened at $34.50. So far today the stock has hit a high of $37.27 and a low of $32.05. As of 11:55, ARO is trading at $32.68, down $5.35 (-14.1%). The chart for ARO looks bullish and S&P gives ARO a positive 4 STARS (out of 5) buy ranking.
For a bearish hedged play on this stock, I would consider an April bear-call credit spread above the $45 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 9.1% return in five and a half months as long as ARO is below $45 at April expiration. ARO would have to rise by more than 37% before we would start to lose money. Learn more about this type of trade here.
ARO hasn't been above $45 at all in the past year and has shown resistance around $43.50 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 ARO.
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