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UPS logoUnited Parcel Service (NYSE: UPS - option chain) and FedEx (NYSE: FDX) shares are getting a lift after competitor Deutsche Post AG announced it will close all DHL Express service centers in the U.S. Since UPS has been the steadier of the two survivors over the past year, I am more interested in a trade on that stock. If you think that UPS 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 the stock.

UPS opened this morning at $53.98. So far today the stock has hit a low of $52.80 and a high of $55.01. As of 12:45, UPS is trading at $53.53, up $1.61 (3.1%). The chart for UPS looks neutral and S&P gives UPS a 3 STARS (out of 5) hold ranking.

For a bullish hedged play on this stock, I would consider a December bull-put credit spread below the $40 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 6.4% return in just six weeks as long as UPS is above $40 at December expiration. UPS would have to fall by more than 24% before we would start to lose money. Learn more about this type of trade here.

UPS hasn't been below $40 at all in the past year and has shown support around $50 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 UPS nor FDX.

UPS (UPS) & FedEx (FDX) gain on DHL closing up shop in US originally appeared on BloggingStocks on Mon, 10 Nov 2008 13:01:00 EST. Please see our terms for use of feeds.

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