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NCR Corporation (NCR) shares were rising today after the company announced in the morning that it acquired DVDPlay, which operates approximately 1,300 DVD rental kiosks in the U.S. and Canada. Financial terms of the deal were not disclosed. NCR plans to convert DVDPlay-branded kiosks to its Blockbuster Express-brand, a revenue-sharing operation with Blockbuster Inc. (BBI). 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 NCR.NCR opened this morning at $9.45. So far today the stock has hit a low of $9.42 and a high of $9.87. As of 12:05, NCR is trading at $9.80 up 0.49 (5.3%). The chart for NCR looks bullish and S&P gives NCR a positive 4 STARS (out of 5) buy ranking.
For a bullish hedged play on this stock, I would consider a July bull-put credit spread below the $7.50 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 13.6% return in seven months as long as NCR is above $7.50 at July expiration. NCR would have to fall by more than 23% before we would start to lose money. Learn more about this type of trade here.
NCR has not been below $7.50 since March and has shown support around $9.20 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 NCR or BBI.
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