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PPG Industries (PPG - option chain) shares are rising today after the company forecast Q1 earnings of $1.30 to $1.35 per share, well above analysts' forecasts of $1.12 per share. 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 PPG.PPG opened this morning at $94.44. So far today the stock has hit a low of $93.70 and a high of $95.97. As of 12:10, PPG is trading at $95.09 up $4.50 (5.0%). The chart for PPG looks bullish and S&P gives PPG a positive 5 STARS (out of 5) strong buy ranking.
For a bullish hedged play on this stock, I would consider an August bull-put credit spread below the $80 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 PPG is above $80 at August expiration. PPG would have to fall by more than 15% before we would start to lose money. Learn more about this type of trade here.
PPG has not been below $80 except for one day since December and has shown support around $85 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 PPG.
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