Mastercard (MA) 11/16/09 PriceWatch Alert Could Hit 24.88% Return

Posted: Monday, November 16, 2009 8:17 AM EDT
By: Market Intelligence Center Staff

Mastercard (NYSE: MA) ended the last trading session at $234.72. So far the stock has hit a 52-week low of $113.05 and 52-week high of $242.93. Mastercard stock has been showing support around 229.43 and resistance in the 241.15 range. Technical indicators for the stock are Bullish 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 a Jan '10 230 covered call (MAL AF) for a net debit in the $220.82 area. That is also the break even stock price for this trade. This covered call has a 61 day duration, provides 5.92% downside protection and a 4.16% assigned return rate for a 24.88% 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 '11 105 Call (ZUE AA) and selling the Jan '10 230 call (MAL AF) for an $117.40 debit. The trade has a 61 day life and would provide 5.25% downside protection and a 6.47% assigned return rate for a 39.00% annualized return rate (for comparison purposes only). Mastercard has a current annual dividend yield of 0.25%. [ABR-Seven Summits Research]