Visa Inc. (V) 11/20/09 PriceWatch Alert Could Hit 29.91% Return

Posted: Friday, November 20, 2009 8:39 AM EDT
By: Market Intelligence Center Staff

Visa Inc. (NYSE: V) closed yesterday at $80.18. So far the stock has hit a 52-week low of $41.78 and 52-week high of $81.97. Visa stock has been showing support around 76.67 and resistance in the 83.31 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 Jan '10 80 covered call (V AP) for a net debit in the $76.43 area. That is also the break even stock price for this trade. This covered call has a 57 day duration, provides 4.68% downside protection and a 4.67% assigned return rate for a 29.91% 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 35 Call (VSK AG) and selling the Jan '10 80 call (V AP) for a $41.70 debit. The trade has a 57 day life and would provide 4.34% downside protection and a 7.91% assigned return rate for a 51.00% annualized return rate (for comparison purposes only). Visa has a current annual dividend yield of 0.62%. [FBB-Seven Summits Research]