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CSX (CSX - option chain) stock is trading lower today after the railroad operator reported earnings last night, posting a fourth-quarter profit of $305 million, or 77 cents per share, on revenue of $2.30 billion. While the company beat analysts' profit forecasts of 76 cents per share, CSX missed revenue estimates of $2.39 billion. 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, CSX opened at $48.09. So far today the stock has hit a high of $48.12 and a low of $46.37. As of 11:55, CSX is trading at $47.05, down $3.45 (-6.9%). The chart for CSX looks bullish and S&P gives CSX a positive 4 STARS (out of 5) buy ranking.
For a bearish hedged play on this stock, I would consider a May bear-call credit spread above the $55 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 an 11.1% return in four months as long as CSX is below $55 at May expiration. CSX would have to rise by more than 16% before we would start to lose money. Learn more about this type of trade here.
CSX hasn't been above $53 at all in the past year and has shown resistance around $52 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 CSX.
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