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Nokia Down on Sony Ericsson Warning, Time for Bearish Hedged Play? |
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| Mar 20, 2008 03:53 PM UTC |
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Tracked Blogger
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3/19 - "Nokia Corp. (NYSE: NOK) stock is trading lower today after competitor Sony Ericcson, a joint venture between LM Ericsson (NASDAQ: ERIC) and Sony (NYSE: SNE), warned that first-quarter sales could be lower than originally expected due to slowing demand for mid- and high-range mobile phones. 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 NOK." "I would consider a July bear-call credit spread above the $40 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 a 5.3% return in four months as long as NOK is below $40 at June expiration. Nokia would have to rise by more than 33% before we would start to lose money." 
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