Add V Puts
Two Triggers Now In Place
PLAY: Buy the Visa January 55 Puts (V MK) at or under $1.40, good for the day. Place a protective stop limit at $0.55 and a pre-determined sniper sell at $2.50.
Dear Bottarelli Research Member,
Going into the final 90 minutes of trading, I’d like to add a cheap yet powerful put play to our ledger. And it comes in the form of Visa (V – NYSE).
We’ll start by looking at the V chart, which shows a very distinct top at the $60.00 level. As you can see, the last three times that Visa tried to break through the $60.00 level, it responded by dropping rather noticeably. Right now, shares of V could be ready to engage in yet another downside move.
Further supporting this downside thesis is today’s move in MasterCard (MA – NYSE). As I write, shares of MA are down over $11.00, which is not yet being reflected in shares of Visa.
Why the drop? Well, when you look at the current economic situation, it sure does not paint a solid picture for credit card companies. For one thing, rising employment means that more and more customers will miss making their payments. As a result, credit card companies are in the process of taking their cards away from customers with the most egregious delinquencies. One report shows that over 40% of current credit card customers could lose their cards. Ouch.
Not only that, but with retail stores closing in every mall across America, people have less places to spend their money. Add it up, and the number of credit card “swipes” in 2009 looks to be the worst in many, many years. This paints a bearish picture for companies like Visa and MasterCard. Therefore, let’s play this down-trend by using Visa puts.
Looking at the January options string, the Visa January 55 Puts (V MK) look like a very, very explosive opportunity. Currently $1.87 out of the money, they’re only trading for $1.35 per contract. Therefore, if Visa follows MasterCard lower, all it’ll take is a $2.00 or $3.00 down-move for us to see a 50% gain (and perhaps even more). All things considered, let’s enter this play now!
PLAY: Buy the Visa January 55 Puts (V MK) at or under $1.40, good for the day. Place a protective stop limit at $0.55 and a pre-determined sniper sell at $2.50.
Looking at our other positions, our KSS January 40 Puts (KSS MH) are inching themselves back, as shares of KSS look like they’ve temporarily topped out just under $40.00. Maintain your puts.
Plus, as you would expect with a 230-point down day, both JASO and LVS are moving lower today — but remember the purpose of each play. Should we see any upside euphoria (spared by political maneuvers going into January 20th), both JASO and LVS have the ability to move aggressively higher. Therefore, holding cheap calls on each play offers us a strong risk/reward scenario. Hold each play as well.
And as always…
Lock and load!
Sincerely,
© 2012 CSR Group, LLC. All rights reserved. Published in USA.
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