Visa Execs Launch Full-Court Press on Japanese Government

Despite the faint odor of desperation emanating from Visa, the stock is extending its recent bounce Monday. However, before we read too much into this advance, let's recall that the stock's Relative Strength Index (RSI) is docked at 28 -- firmly in oversold territory. In fact, despite gaining ground in three of the last four sessions, the shares still haven't climbed high enough to challenge short-term resistance from their 10-day moving average.

And additional hurdles lie beyond that 10-day trendline. Visa recently breached the formerly supportive $80 region, as well as its 200-day moving average. Now, these former technical backstops could switch roles to act as resistance.

It's no surprise, then, that traders appear to be selling new calls on Visa in today's session. Within the first 90 minutes of trading, nearly 2,600 contracts changed hands on the stock's out-of-the-money June 85 call, with the majority crossing the tape at the bid price. By selling calls at this strike, speculators are betting that V will remain pinned below $85 through June expiration, allowing traders to retain the initial net credit as their maximum potential profit on the play.

Yet, despite a recent uptick in volatility, it's not necessarily the most opportune time to sell premium on Visa. The stock's June 85 call carries implied volatility of 41.5% at last check, representing a significant discount to the equity's one-month historical volatility of 53.2%. With some of V's front-month contracts looking a little underpriced, speculators may want to take this opportunity to be option buyers, rather than sellers.

Elizabeth Harrow is a senior equities 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.