Can MasterCard Inc (MA) Continue Its Record-Setting Run?

MasterCard Inc's weekly 12/5 88-strike call is being bought to open today

by Karee Venema

Published on Dec 2, 2014 at 2:06 PM
Updated on Apr 20, 2015 at 5:09 PM

Since hitting an analyst-induced low of $69.64 in mid-October, MasterCard Inc (NYSE:MA) has been nothing short of a technical titan, with the shares up nearly 26% to trade at $87.60. Yesterday, in fact, the equity tagged the $88.16 mark -- its loftiest level on record. In today's session, the stock was last seen 0.1% higher, after MA upped its quarterly dividend and announced a new buyback program. Option traders, however, think there's more fuel left in the tank, and are rolling the dice on a move to uncharted territory by week's end.

The most active MA option this afternoon is the weekly 12/5 88-strike call, where 3,007 contracts have traded. The majority of these have done so on the ask side, implied volatility is up 3.1 percentage points, and fewer than 550 contracts are currently in residence here. Summing it all up, it seems safe to assume a fresh batch of bullish bets is being initiated.

By purchasing these calls for a volume-weighted average price (VWAP) of $0.41, traders expect MA to be sitting north of breakeven at $88.41 (strike plus VWAP) at Friday's close, when the weekly series expires. Gains are theoretically unlimited past this point -- which would mark a fresh all-time peak for MasterCard Inc (NYSE:MA) -- while losses are capped at the initial cash outlay, should the security close south of the strike at expiration. At last check, delta on the call was docked at 0.42, suggesting a 42% chance the option will be in the money at week's end.


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