Savings Experiment: Snow Removal
Why Your 2012 Tax Bill May Jump By $8,000
Baidu.com (BIDU - option chain) shares are rising today on reports that Google (GOOG) advertisers in China have been advised to switch to its rivals, including Baidu and Sohu.com (SOHU). This is on the heels of this weekend's report that Google will shut down its Chinese search engine rather than bow to the countries strict censorship rules. 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 Baidu.
BIDU opened this morning at $570.48. So far today the stock has hit a low of $563.20 and a high of $628.50. As of 12:35, BIDU is trading at $581.05 up $30.81 (5.6%). The chart for BIDU looks neutral and S&P gives BIDU a neutral 3 STARS (out of 5) hold ranking.
For a bullish hedged play on this stock, I would consider a June bull-put credit spread below the $420 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 5.3% return in three months as long as BIDU is above $420 at June expiration. Baidu would have to fall by more than 27% before we would start to lose money. Learn more about this type of trade here.
BIDU has not been below $420 since February 1 and has shown support around $498 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 BIDU, GOOG, or SOHU.
Goldman Earnings Sink After Buffett Dividend
Johnson & Johnson's Income Falls 23%
Burberry Shares Leap on Sales Update
