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TD Ameritrade (AMTD - option chain) stock is trading lower today after the company said its second-quarter earnings "are shaping up much like" earnings in the first quarter. AMTD also presented trading data that was very much a mixed bag, as trading volumes were down in February compared to January, but total assets were larger. 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 play on AMTD.This morning, AMTD opened at $18.50. So far today the stock has hit a high of $19.03 and a low of $18.35. As of 11:45, AMTD is trading at $18.93, up $0.13 (0.7%). The chart for AMTD looks bullish and S&P gives AMTD a positive 4 STARS (out of 5) buy ranking.
For a bullish hedged play on this stock, I would consider an August bull-put credit spread below the $15 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 an 8.7% return in five months as long as AMTD is above $15 at August expiration. TD Ameritrade would have to fall by more than 20% before we would start to lose money. Learn more about this type of trade here.
AMTD has not been below $15 since April and has shown support around $16.50 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 AMTD.
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