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Mastercard Incorporated (NYSE: MA) stock is lower this morning on news that a European Union ruling on fees levied by MA has been delayed until at least the end of this year. The delay may also put the January launch of the Single Euro Payments Area (SEPA) on hold as well, a plan which would allow consumers to authorize payments and use their debit and credit cards anywhere in the 27 EU member states. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on MA.MA hit a one-year high of $203.00 last week, after hitting a one-year low of $90.50 in February. This morning, MA opened at $185.00. So far today the stock has hit a low of $182.10 and a high of $188.47. As of 12:15, MA is trading at $184.27, down $2.50 (-1.4%). The chart for MA looks bullish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bearish hedged play on this stock, I would consider a December bear-call credit spread above the $220 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. This particular trade will make a 5.8% return in 6 weeks as long as MA is below $220 at December expiration. MasterCard would have to rise by more than 19% before we would start to lose money.
MA hasn't been above $203 ever and has shown resistance around $200 recently. This trade could be risky if the credit markets straighten themselves out, but even if that happens, this position could be protected by strong resistance MA formed around $200, where the stock topped last week.
Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in MA.
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