Trades for Visa for Earnings 1-28 pm

• Posted by Greg Harmon
• on January 28th, 2016

Visa, $V, may be the leader in the credit card space, but their stock price has had a rough going the past 2 months. Looking back further there are a few interesting pieces of information in the chart. First there is rising trend support dating back to April, very nearby. It was breached intraday at the August low and retested again two weeks ago, but has continued to hold up.

The orange rectangle also highlights an area that has had a lot of transaction volume, both in the May to July timeframe and in September. With lots of buyers and sellers changing hands in this range it should give some kind of support should an earnings reaction stay within the box.

The Fibonacci retracements from the leg higher in October show it has given back 78.6% of the move so far, as it trends lower. Momentum indicators are bearish. The RSI is in the bearish zone and falling again with the MACD avoiding a cross up and turning back lower. These support more downside.

There is support lower at 69.60 and 68.70 followed by 67.60 and 66.60 before 65.10 and 64.25. Resistance higher may show up at 71.40 and 72.80 followed by 74.90 and 76.50 before 77.50. The last 6 earnings reports have been followed by a 4.38% move on average or $3.10 making for an expected range of 66.90 to 73.10. Short interest is low at 2.3%.

The January 29 Expiry Straddles suggest a slightly larger $3.45 move by expiry tomorrow with implied Volatility at 108% above the February at 33%. Open interest is mainly above the current price for this week, with the biggest at the 71.5 and 72 strikes. There has been large blocks of weekly 71 calls traded on the offer side today as well as sizeable volume on the 70, 70.5 and 71 strike puts.

Trade Idea 1: Buy the January 29 Expiry 70/68 1×2 Put Spread for a 10 cent credit.

Trade Idea 2: Buy the January 29 Expiry 70/68/66 Put Butterfly for $0.45.

Trade Idea 3: Buy the January 29 Expiry 70/71 Call Spread for 55 cents.

Trade Idea 4: Buy the January 29 Expiry 70/71 Call Spread and sell the January 29 Expiry 66.5 Put for free.

Trade Idea 5: Sell the January 29 Expiry 68/72.5 Strangle for a $1.80 credit.

#1, and #2 look for a move lower but not to exceed about 66.50, following options projections. #1 is profitable from anywhere down to 65.90, while #2 makes money between 69.55 and 66.45. #3 looks for the upside to the large volume at 71 today and is profitable between 70.55 and 71. #4 adds leverage to increase the profitability range to between 70 and 71 Friday. #5 looks both ways and uses the big open interest, today’s big volume as well as the historical range. It is profitable between 66.20 and 74.30 Friday.

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