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 +4.3% in Dec 06”, we selected two covered call positions for MasterCard (MA) for January stock options expiration and both positions were profitable returning an average of +4.8% in only 22 days!
The credit card covered calls investment strategy has worked so well we will try it again for next month’s stock options expiration. Using PowerOptions SmarSearchXL stock options search tool, we found the following position for stock options expiration in March of 2007:
| SmartSearchXL covered call search for Feb 23 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Sym |
Stock Price |
Option Sym |
Expire &Strike |
Opt Bid |
%Dnsd. Prot |
%If Unch. |
%If Asgnd. |
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| MA | 104.51 (-1.39) | MACA | 07 MAR 105.0 (22) | 3.1 | 3 | 3.1 | 3.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
For the covered calls search for March of 2007, one position for Master Card was found. The covered calls stock options position for MA is an out-of-the-money [OTM] position with downside protection of +3% and a maximum potential return of +3.5%. 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 in-the-money [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:
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. PowerOptions provides a toll-free number (1-877-992-7971) for customer support (PowerOptions‘s customer support is second to none in the industry) for answering customer questions.
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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]