IAC/InterActiveCorp (NASDAQ: IACI) quarterly profit fell by 4.2% and the company missed EPS estimates, reporting earnings of $0.24 per share this morning compared to expectations of $0.35 per share. The Lending Tree segment of IACI operated at a loss for the third quarter, dragged down (like everything else) by the slowing housing market. However, IACI shares are climbing this morning on rising revenues for the media and advertising side of their business, which includes Ask.com and Citysearch. The company's HSN home shopping network, which had been struggling, is showing signs of recovery with revenues that rose by 5% and a Goldman Sachs analyst said the HSN figures bode well for future growth. If you think that the company 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 IACI.After hitting a one-year high of $40.99 in February, the stock fell to a 52-week low of $25.08 in August. IACI opened this morning at $29.50. So far today the stock has hit a low of $28.89 and a high of $29.65. As of 11:00, IACI is trading at $29.23, up $0.84 (2.9%). The chart for IACI looks bullish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bullish hedged play on this stock, I would consider a January bull-put credit spread below the $25 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 just three months as long as IACI is above $25 at January expiration. IAC would have to fall by more than 14% before we would start to lose money. Learn more about this type of trade here.
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