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Visa Inc (V) Puts Gain Traction Ahead of Earnings

Visa Inc's August 210 put was bought to open yesterday

by 7/2/2014 10:16 AM
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Visa Inc (NYSE:V) tacked on nearly 2% yesterday -- and reclaimed a perch atop its 80-day moving average, which has served as resistance in recent weeks -- as reports surfaced the credit card concern may not have to pay security deposits to operate in Russia. The equity is continuing this move higher today, up 0.5% to trade at $215.25. This positive price action could come as a disappointment to one group of option traders, who bought to open V's August 210 puts on Tuesday, as they bet on a short-term retreat for the Dow component.

Diving deeper reveals the out-of-the-money puts were purchased for a volume-weighted average price (VWAP) of $3.80, making breakeven at the close on Friday, Aug. 15 -- when back-month options expire -- $206.20 (strike less the VWAP). Profit will accrue on a move down to zero, while losses are limited to the initial premium paid, should V finish south of the strike price at expiration.

Looking ahead, Tuesday's crop of option bears may have been eyeing the company's impending quarterly earnings report, slated for release the evening of Thursday, July 24. In the wake of V's top-line miss in late April, the stock shed 5% in the subsequent session. Looking out the past eight quarters, though, the security has averaged a single-session, post-earnings gain of 1%, which narrows to 0.2% when extending the time frame to one week. For Visa Inc's (NYSE:V) fiscal third quarter, Wall Street is calling for a profit of $2.10 per share -- a 22-cent improvement over the company's year-ago results.


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