Let Visa Inc Stock Charge Up Your Portfolio as It Tests $130

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Visa stock - Let Visa Inc Stock Charge Up Your Portfolio as It Tests $130

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After the February correction in the stock market, Visa Inc (NYSE:V) stock rebounded sharply and threatened twice to set a new high. That’s a statement from a quality stock that deserves a second look. And therein lies my bullish opportunity today.

Then again, on March 21 the stock market had another dip which took again took Visa stock down to retest $117 per share. But again it recovered all of that and is once again threatening to set a new high going into earnings.

Last night, American Express Company (NYSE:AXP) reported earnings and the stock is rallying on the headline. This bodes well for V when it reports its earning in six days. I have been long the stock and profitable in my position, but I’d like to add bullish exposure into the earnings event but with caution.

So I will use Visa options to complement my existing position. This would work for somebody who wants to get bullish exposure to Visa stock during this uncertain time.

Fundamentally, V stock is not cheap. It has a 49 price-to-earnings ratio which is not a screaming bargain in absolute terms, but it’s in line with the sector. In fact it’s cheaper than either of Mastercard Inc (NYSE:MA) or Paypal Holdings Inc (NASDAQ:PYPL). Among all transactors, AXP is the cheapest but I favor V here as it seems to be the smarter management team.

Buying stocks near all-time highs is always scary proposition, and even more so during these are uncertain times. So using options to mitigate the out-of-pocket risk makes a lot of sense. This also allows me to build a buffer from current price and my additional risk.


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Technically, Visa is looking bullish. The stock is setting higher lows and knocking on a roof for the fourth time since late February. If the bulls prevail and they break out of this zone, the stock should overshoot and target $130 per share.

My trade today doesn’t even need this rally for me to profit. All I need is for Visa stock to hold support through 2018 and I retain my maximum gains.

Visa Stock Trade Ideas

The Trade: Sell the V JUL $105 put. This is a bullish trade for which I collect 80 cents to open. I have a 85% certitude that I will retain maximum gains. But if the price falls below my strike then I own shares. I would then need to manage off my break-even point of $104.20.

Those who want to mitigate the risk that comes with selling naked puts can sell spreads instead.

The Alternate Trade: Sell the V JUL $110/$105 bull put spread where my risk is limited. Yet if the spread wins it would deliver 10% in yield.

There are no guarantees when investing in stocks, so I never risk more than I can afford to lose.

Learn how to generate income from options here. Nicolas Chahine is the managing director of SellSpreads.com. As of this writing, he did not hold a position in any of the aforementioned securities. You can follow him as @racernic on twitter and stocktwits.

Nicolas Chahine is the managing director of SellSpreads.com.


Article printed from InvestorPlace Media, https://investorplace.com/2018/04/let-visa-inc-v-stock-charge-up-your-portfolio-its-going-higher/.

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