Mastercard (MA) 2/8/10 PriceWatch Alert With 6.12% Downside Protection

Posted: Monday, February 08, 2010 8:29 AM EDT
By: Market Intelligence Center Staff

Mastercard (NYSE: MA) ended the last trading session at $220.74. So far the stock has hit a 52-week low of $139.16 and 52-week high of $269.88. Mastercard stock has been showing support around 212.85 and resistance in the 229.35 range. Technical indicators for the stock are Bearish and S&P gives MA a positive 4 STAR (out of 5) buy rating. MA appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at an Apr '10 220 covered call for a net debit in the $207.24 area. That is also the break even stock price for this trade. This covered call has a 68 day duration, provides 6.12% downside protection and a 6.16% assigned return rate for a 33.05% 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 MA Jan '11 130 Call and selling the Apr '10 220 call for an $80.65 debit. The trade has a 68 day life and would provide 4.57% downside protection and an 11.59% assigned return rate for a 62.00% annualized return rate (for comparison purposes only). Mastercard has a current annual dividend yield of 0.24%. [ABR-Seven Summits Research]