Filed under: Earnings reports, Good news, United Parcel’B’ (UPS), Options, Technical Analysis
United Parcel Service, Inc. (NYSE: UPS) shares are rising slightly today even after the company announced that it lost $2.58 billion, or $2.46 a share in the fourth quarter. UPS made a $6.1 billion payment to shift 45,000 of its employees from one pension plan to another during the quarter. Excluding that payment, UPS made $1.13 a share, which was in line with analyst estimates. The earnings thatmet estimates is buoying the stock, but the pension charge is keeping buyers from going too crazy. 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 UPS.
After hitting a one-year high of $78.99 in August, the stock hit a one-year low of $64.01 last week. UPS opened this morning at $69.31. So far today the stock has hit a low of $69.31 and a high of $71.74. As of 10:55, UPS is trading at $71.34, up $0.42 (0.6%). The chart for UPS looks bearish 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 March bull-put credit spread below the $65 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 9.9% return in just two months as long as UPS is above $65 at March expiration. UPS would have to fall by more than 8% before we would start to lose money.
Continue reading UPS matches Q4 earnings estimates
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