Unusual Options Activity: Mastercard Incorporated (MA)

Shares of credit card giant Mastercard (MA) have been sliding over the past month. However, one trader sees the potential for a move higher in the coming few months.

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  • That’s based on the November $355 calls. With 77 days until expiration, over 17,960 contracts traded against a prior open interest of 110, for a 163-fold explosion in volume. The buyer of the calls paid about $13.85 to make the trade.

    With shares around $350, the option is nearly at-the-money. Over the past year, shares have traded as high as $401. Should shares jump back to that high, the option could move as high as $50, or more than triple the current price.

    Action to take: The recent slide in shares has led to a slightly negative return over the past year. so it’s possible that shares could snap back in the next few months.

    However, the stock does trade at 43 times earnings, a bit of a premium even in today’s markets. Investors may like shares near these prices, although the 0.5 percent dividend is on the low side.

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  • The option trade is at a decent strike price and date for today’s short-term oversold conditions in shares. Traders should look for mid-to-high double-digit gains in the option and look to exit quickly, as shares may be in a longer-term downtrend that could resume as shares come off of oversold levels.

     

    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.