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Visa Inc's (V) New High Brings Near-Term Bulls to the Trading Table

Weekly call volume spiked as V reached a technical milestone

by 3/27/2013 10:00 AM
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Visa Inc (NYSE:V - 166.23) trekked to a new record high of $167.78 within the first hour of trading yesterday, a fact that didn't go unnoticed by bullish speculators. As a result, about 19,000 calls were exchanged during the course of the session, which was more than double the equity's average daily call volume. For comparison, roughly 11,000 puts crossed the tape. A number of speculators seem to be rolling the dice on extended gains for the stock, particularly in the near term.

More specifically, the weekly 3/28 165-strike calls were the most active options of the day, with 2,551 contracts changing hands -- a healthy portion of them at the ask price, signaling buyer-driven activity. These in-the-money calls traded at a volume-weighted average price (VWAP) of $2.09. Since open interest at this strike rose overnight, it's safe to assume that some of Tuesday's volume consisted of new positions. By purchasing these calls to open, traders are hoping Visa will muscle north of $167.09 (strike price plus the VWAP) between now and Thursday's close, which is when these weekly options will expire.

Yesterday's campaign for calls over puts is business as usual for the credit card giant. During the past two weeks, traders on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 16,254 calls, compared to 10,182 puts. The resultant 10-day call/put volume of 1.60 ranks in the 64th percentile of its annual range. Or in simpler terms, speculators have been scooping up bullish bets over bearish at an accelerated clip.

From a technical standpoint, Visa has gained about 10% so far this year, and nearly 40% during the last 52 weeks. What's more, the shares have more than doubled in value since tagging a December 2010 low of $66.50. Meanwhile, the security continues to be guided higher by its 10-week and 20-week moving averages, which have served as doubled-barreled support since June 2012. However, even if V loses its momentum ahead of tomorrow's close, the most the aforementioned bulls will be forced to part with is the initial premium paid.


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