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Visa (V - option chain) stock is trading lower along with most credit card companies this morning after the Senate passed a financial regulatory overhaul yesterday which would reduce interchange fees that retailers must pay issuers and banks for debit-card transactions. 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 V.This morning, V opened at $73.60. So far today the stock has hit a high of $73.75 and a low of $71.27. As of 12:15, V is trading at $72.69, down $2.59 (-3.4%). The chart for V looks bullish and S&P gives V a positive 5 STARS (out of 5) strong buy ranking.
For a bearish hedged play on this stock, I would consider a September bear-call credit spread above the $85 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. For this particular trade, we will make a 7.5% return in two months as long as V is below $85 at September expiration. Visa would have to rise by more than 17% before we would start to lose money. Learn more about this type of trade here.
V hasn't been above $85 since May and has shown resistance around $78 recently.
Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in V.
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