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Nokia (NOK - option chain) shares are rising today after the head of the company's mobile division, Rick Simonson, told India's Economic Times, "By 2011, our efforts will start producing results, as we will be at par with Apple (AAPL) and RIM (RIMM) in smartphones." Nokia alsofiled to broaden its patent dispute with Apple over the weekend. 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 NOK.NOK opened this morning at $13.26. So far today the stock has hit a low of $13.20 and a high of $13.45. As of 12:50, NOK is trading at $13.40 up 55 cents(4.3%). The chart for NOK looks neutral and S&P gives NOK a neutral 3 STARS (out of 5) hold ranking.
For a bullish hedged play on this stock, I would consider an April bull-put credit spread below the $11 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 7.1% return in three and a half months as long as NOK is above $11 at April expiration. Nokia would have to fall by more than 17% before we would start to lose money. Learn more about this type of trade here.
NOK has not been below $45 since March and has shown support around $12.15 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 NOK, AAPL, nor RIMM.
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