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CAL logoContinental Airlines (NYSE: CAL) shares are trading higher today as oil futures are falling now that Hurricane Dolly looks like it will not hit key oil installations in the U.S. Gulf of Mexico. The recent slide in oil prices has been good news for most airline stocks, which were battered as investors acted like there was no stopping the rise in oil. 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 CAL.

After hitting a one-year high of $37.79 in October, the stock hit a one-year low of $5.91 in July. CAL opened this morning at $13.46. So far today the stock has hit a low of $12.90 and a high of $15.20. As of 12:50, CAL is trading at $13.84, up $0.48 (4.4%). The chart for CAL looks bearish but improving slightly, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bullish hedged play on this stock, I would consider a December 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 19.0% return in just five months as long as CAL is above $5 at December expiration. Continental would have to fall by more than 64% before we would start to lose money. Learn more about this type of trade here.

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Continental Airlines (CAL) lifted by easing oil worries originally appeared on BloggingStocks on Wed, 23 Jul 2008 14:42:00 EST. Please see our terms for use of feeds.

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