Unusual Options Activity: MasterCard (MA)

Shares of credit card giant MasterCard (MA) have been heading gradually higher over the past few months, but recently slumped following lackluster earnings. One trader sees a rebound in shares in the coming months.

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  • That’s based on the November $375 calls. With 106 days until expiration, over 9,140 contracts traded against a prior open interest of 173, for a 53-fold rise in volume. The buyer of the calls paid about $10.50 to make the trade.

    With shares recently down to around $368, off a 52-week high of $400, the stock is now trading at a 5-month low.

    As a member of the oligopoly of credit card networking companies, the company makes a large profit margin, but the share performance has been low in the past year, up less than 20 percent in the last year.

    However, given the 45 percent rise in earnings and 35 percent rise in revenue, even coming off the pandemic, the company’s long-term profitability points to a recovery in time.

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  • Action to take: Shares yield just under 0.5 percent right now, a little on the low side for all but long-term investors to get paid to wait. In a bigger selloff, this is a name to consider buying, but this looks like a smaller decline about to turn around.

    The November calls have just over 3 months to play out, and are well under the stock’s trading range over that time, which makes for the right balance that can potentially lead to triple-digit profits.

     

    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.

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