Visa Options (V): Unusual Trading Activity
Options in credit card company Visa (V) are showing a large amount of unusual trading activity this morning.
Visa is not far from the all time highs it reached last week. While the stock’s down slightly today at $123.30, shares of this mega cap credit-card company have doubled since late 2010.
And experienced option traders are weighing whether it’s time to jump in or abandon ship.
Well, at least one trader decided today it was time to jump in… and jump in big!
He was probably influenced by the recent consumer credit report. It showed more people are continuing to use credit cards for their purchases.
So, what’s this trader doing today?
According to our tracking system, he sold 5,000 V July $120 strike put options for an average price of $0.90. This represents two times the number of contracts currently open on this particular strike.
Remember, put selling is a bullish trade. The option trader needs the stock to stay at or above the strike price by expiration to profit. And that’s exactly what this trader is expecting.
The total premium collected from the sale of these 5,000 Visa contracts was a cool $450,000.
Now, as long as V stays at or above $120 per share for the next two weeks, this trader will be a very happy camper.
And I think there’s a very good chance the trade will work out for him.
Here’s why…
For those of you who don’t know, Visa manages a group of global payment card brands. They sell licenses to financial institutions that issue credit-cards to their customers.
The company itself brings in revenue by acting as the payment processor which facilitates the authorization, clearing, and settlement of transactions on its proprietary networks.
And Visa maintains the largest card scheme in the world.
But that’s only half of the story…
The bullish case for Visa hinges on the love affair consumers and businesses have with their credit cards. As long as they continue to pay more with cards and less with cash and checks, Visa will continue to benefit.
In addition, the company isn’t exposed to any credit risk. Lending to cardholders isn’t part of Visa’s business model. As a result, the deteriorating consumer credit environment has little effect on the company.
And finally, Visa’s network is hard (if not impossible) to duplicate. The company connects thousands of financial institutions, and its network is used daily by millions of cardholders and merchants.
The fact is… this expansive network creates a substantial barrier for potential competitors.
Tough to question these facts and debate the truth that this is a great name.
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Safe Trading,
Marcus Haber
Category: Unusual Options Trading Activity
