Mastercard (MA) PriceWatch Alert Targets 10.37% Downside Protection

Posted on Wednesday, July 09, 2008 8:07 AM

Mastercard (NYSE: MA) closed yesterday at $264.25. So far the stock has hit a 52-week low of $120.00 and 52-week high of $320.30. Mastercard stock has been showing support around 227.98 and resistance in the 283.12 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 Oct '08 260 covered call (MAL JW) for a net debit in the $236.85 area. That is also the break even stock price for this trade. This covered call has a 101 day duration, provides 10.37% downside protection and a 9.77% assigned return rate for a 35.32% 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 '09 180 Call (MAL AP) and selling the Oct '08 260 call (MAL JW) for a $65.20 debit. The trade has a 101 day life and would provide 7.21% downside protection and a 22.70% assigned return rate for an 82.00% annualized return rate (for comparison purposes only). Mastercard does not pay dividends at this time. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]