BHP Billiton Ltd. (NYSE: BHP) opened at $61.04. So far today the stock has hit a low of $60.35 and a high of $62.02. As of 10:50, BHP is trading at $61.11, down $2.96 (4.6%).

After hitting a one year high of $68.88 in July, the stock has taken a couple of big hits over the past month. Trade union Solidarity is threatening a strike over wages beginning this weekend that would disrupt output at mines owned by BHP and several competitors including Anglo American PLC (NASDAQ: AAUKD). Anglo Platinum and Impala Platinum Holdings recently reached a deal with unions that will increase wages by up to 10% for nearly 40,000 employees at the companies' South African mines. Technical indicators for BHP are bullish but deteriorating, while S&P gives the stock a very negative 1 STARS (out of 5) strong sell rating.

For a bearish hedged play on this stock, I would consider a September bear-call credit spread above the $70 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk and leverage returns. For this particular trade, we will make an 8.7% return in just 6 weeks as long as BHP is below $70 at September expiration. BHP would have to rise by more than 14% before we would start to lose money.

BHP has never been above $70 at all this year, and has shown some resistance around $65 recently. This trade could be risky if metal prices soar further, but even if that happens, it could be tough for the stock to get back over the $69 level where it topped out in July.

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 BHP or AAUKD.

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