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Visa Option Trader Makes $4.3M Bet On 14% Upside

Wayne Duggan

Visa Inc (NYSE: V) shares are up 16% in the past month, but at least one larger option trader is betting on more upside from the credit card giant as the US economy begins to open back up.

The Trade

On Tuesday morning, Benzinga Pro subscribers received an option alert related to an unusually large Visa trade.

  • At 11:56 a.m., a trader bought 12,000 Visa call options with a $220 strike price expiring on Sep. 18 at the ask price of $2.84. The trade represented a more than $3.4 million bullish bet.

Why It’s Important

Even traders who stick exclusively to stocks often monitor option market activity closely for unusually large trades. Given the relative complexity of the options market, large options traders are typically considered to be more sophisticated than the average stock trader.

Many of these large options traders are wealthy individuals or institutions who may have unique information or theses related to the underlying stock.

Unfortunately, stock traders often use the options market to hedge against their larger stock positions, and there’s no surefire way to determine if an options trade is a standalone position or a hedge. In this case, given the relatively large size of Tuesday’s Visa option trade it could certainly be institutional hedging.

Visa’s Uncertain Outlook

There doesn’t seem to be any company-specific news that could have triggered the large buy on Tuesday, suggesting the buyer may simply see Visa as a major beneficiary of an overall recovery in the economy in the coming months.

Wall Street has been quiet on Visa since last Wednesday when Cowen reiterated its Outperform rating and $196 price target for Visa. Earlier this month, Visa withdrew its full-year guidance but reported a 4% increase in fiscal second-quarter profits.

Bullish sentiment among StockTwits messages mentioning Visa was at 93.4% on Tuesday, up from its 2020 low of 56.6% on April 3.

  V Chart by TradingView new TradingView.widget( { "width": 680, "height": 423, "symbol": "NYSE:V", "interval": "D", "timezone": "Etc/UTC", "theme": "light", "style": "1", "locale": "en", "toolbar_bg": "#f1f3f6", "enable_publishing": false, "allow_symbol_change": true, "container_id": "tradingview_a8284" } ); Benzinga’s Take

The $3.4 million call purchase has a break-even price of $222.84, suggesting 14.7% upside for the stock in less than four months. Visa is expected to report earnings in late July, so the trader may be expecting relatively strong fiscal third-quarter numbers or a rally if and when Visa updates its full-year guidance.

Prior to the health crisis, Visa was forecasting double-digit revenue growth for the full year.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

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