) took the opposite path of sector peer
) yesterday by tumbling 7.5%, after a federal judge invalidated a
2011 Fed rule regarding merchant charges for debit-card
transactions -- a move that could force the central bank to reduce
these fees. Nevertheless, bullish traders were undeterred, as
approximately 57,000 calls switched hands by the closing bell,
which was almost eight times the equity's average single-session
call volume. At the other end of the options spectrum, around
36,000 puts were traded.
At the helm was the August 190 call, where nearly 7,700 contracts
crossed the tape -- a large portion of them at the ask price,
pointing to buyer-driven activity. These deep out-of-the-money
calls were exchanged at a volume-weighted average price (VWAP) of
$1.69. Meanwhile, open interest surged at this strike overnight,
confirming the initiation of new positions. In other words, traders
are betting on V to rise north of breakeven at $191.69 (strike
price plus the VWAP) by the close on Aug. 16, which represents
front-month expiration. This denotes a jump of 9.1% from the
equity's current perch at $175.64.
Also garnering notable attention was the weekly 8/2 190-strike
call, which saw close to 6,900 contracts trade at a VWAP of $0.54.
This strike saw an overnight rise in open interest, and the
majority of the calls crossed at the ask -- again signaling the
creation of fresh bullish bets. In this case, however, the
speculators will profit if V surmounts $190.54 (strike plus VWAP)
by this Friday's close, when these weekly options expire. At last
check, the delta for these calls was docked at just 0.035, meaning
they have less than a 4% chance of finishing in the money.
This predilection for short-term calls over puts is more of the
same for the credit card behemoth.
Schaeffer's put/call open interest ratio (SOIR)
for V checks in at 0.69, indicating calls outstrip puts among
options with a shelf-life of three months or less. In fact, this
ratio ranks lower than all similar readings taken within the last
12 months, meaning near-term options players are more call-heavy
toward the stock now than at any other time during the past year.
On the technical front, Visa sports a year-to-date gain of roughly
16% -- despite yesterday's drop -- and a 52-week advance of around
37%. However, the stock is now in danger of finishing the week
below its 20-week moving average for the first time since June
2012. Still, even if the stock fails to conquer the $190 mark, the
most yesterday's bulls stand to lose is the initial premium paid
for their long calls.
This article by Terri Stridsberg was originally published on
Schaeffer's Investment Research
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