Diana Shipping (NYSE: DSX) shares have been sinking today after the company announced it will suspend dividend payments after December. DSX had been paying a 25.30% annual dividend rate. 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 DSX.This morning, DSX opened at $12.50. So far today the stock has hit a low of $10.28 and a high of $11.01. As of 2:35, DSX is trading at $10.96, down $2.97 (21.3%). The chart for DSX looks bearish.
For a bearish hedged play on this stock, I would consider a November bear-call credit spread above the $12.50 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 an 11.1% return in ten days as long as DSX is below $12.50 at November expiration. DSX would have to rise by more than 14% before we would start to lose money. Learn more about this type of trade here.
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 DSX.
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TheStreet.com's Jim Cramer says investors need to look at the longer time frame and see what drove rates higher to begin with -- world trade and a ship shortage. .gif){kind=logo}
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