Unusual Options Activity: Visa (V)

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  • Credit card companies have seen their shares bounce, but if consumers stop paying the bills, it’s a space that could be in for some trouble. Yet one trader still sees upside ahead for the sector with a bet on Visa (V).

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  • The bet? The September 2021 $200 calls. Over 16,900 contracts traded against a prior open interest of 453, for a 37-fold increase in volume.

    The trade, expiring in 323 days, will move in-the-money if shares rise about 10 percent from their current price near $181. The trader paid about $13.35 for the call option.

    Shares of Visa hit the skids on Wednesday on the back of poor earnings at competitor Mastercard, but are still up 6 percent over the past year. The company has reported a 23 percent drop in earnings and a 17 percent drop in revenues.

    Action to take: Shares are likely to rebound in time. And with shares having a 52-week high of $217, the $200 calls are a solid bet, as a mere return to the old high before expiration guarantees a profit.

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  • The recent drop in shares will take some time to play out, but those who buy these options today can likely nab high double-digit returns on the options. Traders may even be able to see such returns on a post-election bounce for stocks.