In 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.
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In article, “Making Money on Credit Returns +4.8% in Jan. 07”, we selected a covered calls position for MasterCard (MA) for March stock options expiration and the position was fully profitable returning +3.5% in only 22 days!
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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 positions for stock options expiration in April of 2007:
| SmartSearchXL covered call search | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Sym |
Stock Price |
Option Sym |
Expire &Strike |
Opt Bid |
%Dnsd. Prot |
%If Unch. |
%If Asgnd. |
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| AXP | 57.44 (-0.05) | AXPDY | 07 APR 57.5 (30) | 1.2 | 2.1 | 2.1 | 2.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| MA | 109.57 (-1.13) | MADB | 07 APR 110.0 (30) | 3.5 | 3.2 | 3.3 | 3.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
For the credit cards covered calls strategy two out-of-the-money positions were found for AXP and MA with potential returns of 2.2% and 3.7% respectively (30 days). The AXP and MA covered calls stock options positions also had downside protection of 2.1% and 3.2%, respectively.
For a covered calls position, the price of the stock can decrease and still remain profitable, as long as the price of the stock does not decrease more than its downside protection.
Out-of-the-money covered calls require the price of the stock to appreciate to or above the strike price of the call option in order to realize the maximum return.
Competitors:
Competitors for AXP include: Mastercard Incorporated (MA), Discover Financial Services LLC (private), Visa International (private), Capital One Financial Corp. (COF), and Euronet Worldwide Inc. (EEFT).
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).
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[tags] Visa, Discover Financial Services LLC, Visa International, AXP, American Express Co., CKFR, Checkfree Corp., COF, Capital One Financial Corp., EEFT, Euronet Worldwide Inc., MA, MasterCard Inc., UEPS, Net 1 U.E.P.S. Techs. Inc., covered call investment strategy, investment strategy, iron condor, poweroptions, stock option trading, stock options [/tags]