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Salesforce.com (CRM - option chain) shares are rising today after the company reported Q1 earnings yesterday after the close of trading, posting a profit of $17.7 million, or 13 cents per share. Excluding items, CRM earned 30 cents per share on revenue of $376.8 million, while analysts forecast a profit of 30 cents per share on revenue of $367.8 million. 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 CRM.CRM opened this morning at $73.94. So far today the stock has hit a low of $73.91 and a high of $84.07. As of 12:20, CRM is trading at $83.17 up $4.14 (5.2%). The chart for CRM looks bearish and S&P gives CRM a negative 2 STARS (out of 5) sell ranking.
For a bullish hedged play on this stock, I would consider an August 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 an 8.7% return in three months as long as CRM is above $55 at July expiration. Salesforce.com would have to fall by more than 33% before we would start to lose money. Learn more about this type of trade here.
CRM has not been below $55 since October and has shown support around $74 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 CRM.
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