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Sentiment Snapshot: MasterCard Incorporated (MA)

Can the credit card concern master intermediate-term resistance?

by Andrea Kramer (akramer@sir-inc.com) 1/8/2009 2:35 PM

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While there may be "some things money can't buy," MasterCard Incorporated (MA: sentiment, chart, options) options aren't in that category. In fact, options players proved that point yesterday, with both bullish and bearish bettors flocking to the credit card king.

As reported in this morning's Opening View, MA saw about 15,600 calls cross the tape, more than doubling its average daily volume of fewer than 7,000 contracts. However, it was the security's puts that garnered the most attention, with almost 30,000 contracts changing hands � more than 4.5 times the average daily volume of fewer than 6,500 contracts.

Most of the bullish bets centered around MA's January 2009 170 call, with 2,905 contracts crossing the tape. However, the 160 strike is home to peak call open interest in the front-month series, with nearly 7,500 contracts in residence.

On the flip side, yesterday's January 2009 150 strike was the most popular among put players, with more than 9,500 contracts changing hands. This strike has almost 12,200 bearish bets in residence, making it the site of peak put open interest in the January series.

MA option data from Wednesday, Jan. 7, 2008

Yesterday's preference for pessimistic positions is seemingly an extension of the recent trend in the options pits. During the past 10 days on the International Securities Exchange (ISE), MA has seen more puts than calls purchased to open. The stock's 10-day put/call ratio of 1.11 registers in the 75th annual percentile, suggesting that the recent bearish bias has been more apparent only a quarter of the time during the past year.

So, why the surge in skepticism? Options speculators could be responding to some fresh fundamental issues from MasterCard.

On Monday, the company announced that it acquired Orbiscom Ltd., a payments-solutions software provider, for approximately $100 million. The next day, the New York-based firm announced a heap of organizational and personnel changes, including naming Wendy Murdock chief franchise officer to oversee payment system integrity and franchise development.

Furthermore, some investors may fear that today's dismal retail sales figures for December could translate to deteriorating credit and debit purchase volume growth for MA. Not more than a month ago, analysts at Cowen downgraded the credit card concern � as well as rival Visa (V) � citing poor volume growth during the prior 3 months.

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Sentiment Snapshot: MasterCard Incorporated (MA)

Can the credit card concern master intermediate-term resistance?

by Andrea Kramer (akramer@sir-inc.com) 1/8/2009 2:35 PM

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