Mastercard (MA) PriceWatch Alert Could Hit 41.69% Return

Posted on Friday, July 11, 2008 8:07 AM

Mastercard (NYSE: MA) closed yesterday at $253.20. 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 239.10 and resistance in the 265.06 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 '08 250 covered call (MAL JV) for a net debit in the $224.60 area. That is also the break even stock price for this trade. This covered call has a 99 day duration, provides 11.30% downside protection and an 11.31% assigned return rate for a 41.69% 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 '08 250 call (MAL JV) for a $56.60 debit. The trade has a 99 day life and would provide 6.56% downside protection and a 23.67% assigned return rate for an 87.00% 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]