What Happened When Alex Kenjeev Paid His Student Loan in Cash
Behind the Spritz: What Really Goes Into a Bottle of $100 Perfume
Bed Bath & Beyond (BBBY - option chain) stock is trading lower today after the company reported Q1 earnings after the close yesterday. While EPS came in at 0.52, which was well above estimates of 0.48, the company's forecast for earnings in the coming quarter fell below current estimates. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on BBBY.This morning, BBBY opened at $39.19. So far today the stock has hit a high of $40.12 and a low of $39.10. As of 11:30, BBBY is trading at $39.86, down $1.60 (-3.9%). The chart for BBBY looks bearish and S&P gives BBBY a neutral 3 STARS (out of 5) hold ranking.
For a bearish hedged play on this stock, I would consider a November bear-call credit spread above the $50 range. A bear-call credit spread is an options position that combines the purchase and sale of call 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 7.5% return in five months as long as BBBY is below $50 at November expiration. BBBY would have to rise by more than 25% before we would start to lose money. Learn more about this type of trade here.
BBBY hasn't been above $50 at all in the past year and has shown resistance around $46 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 BBBY.
Goldman Earnings Sink After Buffett Dividend
Johnson & Johnson's Income Falls 23%
Burberry Shares Leap on Sales Update
