Visa Inc. (V) Option Traders Gamble On a Pullback

Visa Inc (NYSE:V) may reassess its sponsorship of FIFA following recent bribery allegations

May 28, 2015 at 1:20 PM
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A number of major FIFA sponsors have expressed disappointment with the organization in the wake of the recent bribery scandal and subsequent arrests. Visa Inc (NYSE:V) is one of the companies, saying it is expecting "swift and immediate steps" from FIFA, otherwise it will re-evaluate its support. Following the reports (and amid a broad-market decline), V has shed 0.5% to trade at $69.14 -- extending its recent retreat from record highs -- a move that option traders have been anticipating.

In fact, at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), V's 10-day put/call volume ratio of 1.18 ranks in the 83rd percentile of its annual range. In other words, puts have been bought to open over calls at a faster-than-usual clip in recent weeks.

Outside of the options pits, sentiment toward V is more mixed. Among the brokerage bunch, for example, 19 of 24 analysts maintain a "buy" or better rating, with not a single "sell" to be found. Meanwhile, the average 12-month price target of $74.40 represents a slim 7.6% premium to current trading levels -- but sits in territory yet to be charted.  Elsewhere, less than 3% of the stock's float is sold short, yet at V's average daily pace of trading, it would take more than a week to cover these shorted shares.

Technically speaking, Visa Inc (NYSE:V) has been making a series of higher highs in 2015, resulting in a year-to-date gain of 5.5%. What's more, the shares topped out at $70.69 -- their loftiest perch to date -- on May 15. As such, it's possible some of the recent put buying -- particularly at out-of-the-money strikes -- is a result of shareholders protecting paper profits against a pullback.
 

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