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US Airways (LCC - option chain) shares are rising today even though the company said it lost $45 million, or 28 cents per share, during the first quarter. Excluding one-time items, the company lost 55 cents per share, better than the loss of 71 cents per share forecast by analysts. 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 LCC.LCC opened this morning at $6.68. So far today the stock has hit a low of $6.43 and a high of $6.85. As of 12:00, LCC is trading at $6.54 up 0.06 (0.9%). The chart for LCC looks bullish and S&P gives LCC 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 $5 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 14.3% return in five months as long as LCC is above $5 at September expiration. US Air would have to fall by more than 23% before we would start to lose money. Learn more about this type of trade here.
LCC has not been below $5 since early February and has shown support around $6.25 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 LCC.
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