Unusual Options Activity: Mastercard (MA)

Credit card provider Mastercard (MA) is up 20% over the past year, just slightly underperforming the overall stock market. One trader sees shares trending higher in the coming months.

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  • That’s based on the July $475 calls. With 64 days until expiration, 8,589 contracts traded compared to a prior open interest of 133, for a 65-fold rise in volume on the trade. The buyer of the calls paid $4.50 to make the bullish bet.

    Mastercard shares recently traded for about $454. So shares would need to rise $21, or about 4.6%, for the option to move in-the-money. The strike price is still under Mastercard’s 52-week high of $490.

    Operationally, the company has been going strong. Revenues are up 10% over the last year and earnings have jumped by 28%. Even better, Mastercard has a hefty 46% profit margin.

    Some recent concern about slowing consumer spending has weighed on shares. But Mastercard will continue to earn fees and interest and generate big profits for investors.

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  • Action to take: Investors may like shares here, or on any market pullback. Currently, Mastercard pays a 0.6% dividend, which it has a history of increasing over time.

    For traders, shares look likely to trend higher in the coming weeks and months. That makes the July $475 calls a reasonable trade, with the opportunity for mid-double-digit returns.

     

    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 company mentioned in this article.

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