Making Money on Credit Returns +3.5% in Mar. 07

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.
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).
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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