In the article, “Visa – Plastic Money – IPO”, we analyzed the credit card industry and illustrated how profitable a covered call strategy for credit card companies can be.In article, “Making Money on Credit Returns 3%”, we selected several covered call positions for MasterCard (MA) for December stock options expiration and every position was profitable returning an average of +4.3% in only 30 days!
The credit card covered calls investment strategy has worked so well last couple of months we will try it again for next month’s stock options expiration. Using PowerOptions SmarSearchXL stock options search tool, we found the following positions for options expiration in January:
|SmartSearchXL covered call search for December 22|
|MA||96.35 (+0.64)||MAAS||07 JAN 95.0 (29)||4.5||4.7||3.4||3.4|
|MA||96.35 (+0.64)||MAAT||07 JAN 100.0 (29)||2.2||2.3||2.3||6.2|
For the covered calls search for January, two positions for Master Card were found. The first covered calls stock options position for MA is an in-the-money [ITM] position with +4.7% downside protection and a potential profit of +3.4% in only 29 days. The second covered calls stock options position for MA is an out-of-the-money [OTM] position with downside protection of +2.3% and a maximum potential return of +6.2%.
The OTM position requires the stock price of MA to appreciate in order to realize the maximum return for the position. Generally, OTM positions have higher potential return with less downside protection and ITM positions have higher downside protection but less potential return. This ITM/OTM tradeoff illustrates the powerfulness of covered calls as the strategy allows investors to tailor their investments for their own personal risk/reward profile.
Competitors for MA include: American Express Company (AXP), Discover Financial Services LLC (private), Visa International (private), Checkfree Corp. (CKFR), and Net 1 U.E.P.S. Techs. Inc. (UEPS).
For more information about how to identify and research great option trades, visit the PowerOptions website. PowerOptions will allow you, with a few quick clicks, to quickly and accurately compare trades and you will find the data you need to make quick, clear, and informed decisions. With PowerOptions tools, you can trade knowing you have found the best investment for your risk/reward profile.
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[tags]Visa, Discover Financial Services LLC, Visa International, AXP, American Express Co., CKFR, Checkfree Corp., UEPS, Net 1 U.E.P.S. Techs. Inc., covered call investment strategy, investment strategy, iron condor, poweroptions, stock option trading, stock options[/tags]