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Pork producers aren't the only stocks getting hammered by swine flu fears. Brokerage JPMorgan observed today that "concerns over the swine flu outbreak could weigh on MasterCard Inc. (NYSE: MA - option chain) / Visa Inc. (NYSE: V - option chain) shares due to fears that cross-border fees may suffer from reduced cross-border travel related to the virus," sending shares of both companies lower at the sound of the opening bell.
Although JPMorgan added that it's too early to tell what impact the swine flu will have on MasterCard and Visa, the firm asserted that "the risk is worth monitoring in our view."
The warning likely comes as a surprise to option players, who have recently displayed an upbeat bias toward both credit card concerns. During the past 10 days, traders on the International Securities Exchange (ISE) have bought to open 2.0 calls for every put on MA, along with 2.37 calls for every put on V. In other words, bullish bets have been more than twice as popular as their bearish counterparts.
In the coming weeks, those optimistic options could actually keep the shares stifled. Visa is trading directly below peak call open interest of 13,957 contracts at the May 60 strike, and MasterCard is trading well below heavy accumulations of call open interest at the May 180 and May 200 strikes. As expiration approaches, the unwinding of hedges related to this open interest could act as a technical headwind for both stocks.
Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.
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