Palm credit spread play

Too think I just purchased a Palm Treo. I guess my purchase just wasn’t enough.

clipped from www.bloggingstocks.com Palm dives on outlook cut Palm, Inc. (NASDAQ: PALM) stock is falling this morning after the company announced yesterday that it is expecting a net loss of 22 cents to 24 cents per share for the current quarter on sales of about $345 million to $350 million. The company had forecast sales of about $375 million. Analysts were looking for a 4 cent per share profit. PALM cited product delays for the slump in sales. For a bearish hedged play on this stock, I would consider a February bear-call credit spread above the $7.50 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. This particular trade will make an 8.7% return in 10 weeks as long as PALM is below $7.50 at February expiration. Palm would have to rise by more than 36% before we would start to lose money.