MasterCard (MA) is flying high this morning following a successful breakout bid. And this pop is all the more interesting given the lack of excitement elsewhere in the market today.
MA stock has a successful track record for rewarding breakout buyers, and there’s no reason to think the current episode will be any different.
MasterCard’s technical posture remains firmly bullish. Shares are perched above all major moving averages at yet another new all-time high. The absence of any overhead resistance should make it all the easier for MasterCard stock to eventually tag the century mark.
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We’ll see if MasterCard stock can take a page out of the tech playbook and stage a rally into its upcoming earnings announcement set for July 29.
Those a bit uneasy holding any positions into MasterCard earnings should find comfort in the fact that it’s not a big earnings mover. While there’s always the risk for some outlier move we can structure a limited risk option spread to keep our exposure to a minimum.
Despite quarterly earnings, MasterCard stock hasn’t experienced the typical volatility buildup in anticipation of the event. As such its option prices remain relatively depressed. With an IV rank of 22%, option premiums are sitting in the lower quartile.
MasterCard Stock Option Spread
The cheaper option prices coupled with the $100 price level acting as a potential magnet overhead sets up an interesting option spread opportunity.
Buy the Sep $95/$100 bull call spread for $2.45 or better. The risk is limited to the initial debit of $2.45 and will be forfeited if MasterCard stock sits below $95 at September expiration.
The max reward is limited to the distance between strikes minus the initial debit, or $2.55, and will be captured if MA stock can vault above $100 by expiration.
The spread offers the ability to double your money should MasterCard stock rise a mere 3% from here.
As of this writing, Tyler Craig did not hold a position in any of the aforementioned securities.
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