If you’ve ever painted a room before, you know it can be quite the decision trying to figure out what color looks best. The same can sometimes be true of options trading — there are so many strategies available that it might be difficult to select which one is best.

I’ll try to make it easy on you by suggesting a trade idea of my own:

Sherwin-Williams (SHW — $172.83): Put Credit Spread

The trade: Sell the August 160/165 Put Credit Spread (selling the August 165 put and buying the August 160 put) for 60 cents or better.

The strategy: The maximum potential profit for this trade is 60 cents if SHW is trading above $165 at August expiration. The maximum loss is $4.40 ($5 – $0.60) if SHW is trading below $160 at August expiration. Breakeven is $164.40 at expiration based on a credit of 60 cents.

The rationale: Late last year, Best Stocks for 2013 pick Sherwin-Williams had plans to acquire Mexico’s Consorcio Comex. Just this past week, however, that move was blocked by Mexico’s Competition Commission, with the MCC saying the deal would have given SHW about a 50% market share in Latin America. At the same time, Sherwin-Williams announced a 13% year-over-year increase for second-quarter earnings, though it missed the consensus estimate. Still, that doesn’t mean SHW is done … and the chart is a big factor on why this trade idea might work.

Click to EnlargeSherwin-Williams stock dropped below its 200-day simple moving average the day earnings were announced, but was able to close above it that same session. Since then, SHW has been able to claw above a pivot level (resistance) around $170 and has not closed below it in more than a week.

The $170 level should now be support for the stock, which might just be enough to keep it from moving lower again. In addition, the 200-day SMA is just below the $170 area and just above $165 as a last line of defense.

Green looks like a good choice for this trade idea!

As of this writing, John Kmiecik did not hold a position in any of the aforementioned securities.