Texas Instruments (TXN)-NYSE

Texas Instruments (NYSE: TXN) shares are trading higher after Nokia (NYSE: NOK) reported that its single-chip plan is still on track despite Infineon (NYSE: IFX), a supplier for NOK, announcing yesterday that it is seeing some delays. TXN is supplying NOK with GSM single chips for its mobile handsets and may be called upon to pick up the slack during this delay. If you think that the stock 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 TXN.

After hitting a one-year high of $39.63 in July, the stock hit a one-year low of $27.51 in March. TXN opened this morning at $32.36. So far today the stock has hit a low of $32.32 and a high of $33.00. As of 1:17, TXN is trading at $32.73, up 0.24 (0.7%). The chart for TXN looks bullish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bullish hedged play on this stock, I would consider an October bull-put credit spread below the $27.50 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 13.6% return in just five months as long as TXN is above $27.50 at October expiration. TXN would have to fall by more than 16% before we would start to lose money. Learn more about this type of trade here.

TXN hasn't been below $27.50 at all in the past year and has shown support around $32 recently. This trade could be risky if the company's earnings (due out in mid-July) disappoint, but even if that happens, this position could be protected by the support the stock might find around $28, where it found support over the past two months.

DISCLOSURE: This is just for your education purpose. We are not responsible for any of your losses. Please do at your own risk.