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Procter & Gamble (PG - option chain) shares rose Thursday after the company said it earned $4.66 billion, or $1.49 per share during its second quarter, with revenue coming in at $21 billion. Analysts had forecast a profit of $1.40 per share on revenue of $21.07 billion. 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 PG.
PG opened at $61.67. In morning trading, the stock hit a low of $61.58 and a high of $63.31. As of 11:20, PG was trading at $62.27 up 1.46 (2.4%). The chart for PG looks bullish and S&P gives PG a positive 4 STARS (out of 5) buy ranking.
For a bullish hedged play on this stock, I would consider a September bull-put credit spread below the $55 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 4.4% return in three months as long as PG is above $55 at April expiration. P&G would have to fall by more than 11% before we would start to lose money.
PG has not been below $55 since July and has shown support around $56 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 PG.
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