Visa Inc. (V) 2/5/10 PriceWatch Alert With 8.97% Downside Protection

Posted: Friday, February 05, 2010 8:27 AM EDT
By: Market Intelligence Center Staff

Visa Inc. (NYSE: V) closed yesterday at $83.05. So far the stock has hit a 52-week low of $48.74 and 52-week high of $89.69. Visa stock has been showing support around 80.63 and resistance in the 87.39 range. Technical indicators for the stock are Bullish and S&P gives V a neutral 3 STAR (out of 5) hold rating. V appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jun '10 80 covered call for a net debit in the $75.60 area. That is also the break even stock price for this trade. This covered call has a 134 day duration, provides 8.97% downside protection and a 5.82% assigned return rate for a 15.85% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the V Jan '11 55 Call and selling the Jun '10 80 call for a $21.85 debit. The trade has a 134 day life and would provide 7.47% downside protection and a 14.42% assigned return rate for a 39.00% annualized return rate (for comparison purposes only). Visa has a current annual dividend yield of 0.60%. [FBB-Seven Summits Research]