Market Overview

Visa Option Trader Makes $8.6M Bet On 15% Upside

Visa Option Trader Makes $8.6M Bet On 15% Upside

Visa Inc (NYSE: V) shares are up 12.7% in the past three months, 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 Visa Trade

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

  • At 11:48 a.m., a trader bought 3,878 Visa call options with a $205 strike price expiring in September 2021 at the ask price of $22.25. The trade represented a more than $8.6 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 Wednesday’s Visa option trade it could certainly be institutional hedging.

Goldman Bump?

The huge call option purchase comes just one day after Goldman Sachs analyst Matthew O'Neill initiated coverage of Visa with a Buy rating and $223 price target. O’Neill said payments and IT services stocks could actually benefit from a rise in contactless payments and online retail sales due to COVID-19. O’Neill also said Visa has a differentiated payments business and is diversified across different sectors.

Benzinga’s Take

The $8.6 million call purchase has a break-even price of $227.25, suggesting 15.5% upside for the stock over the next 14 months. Visa is expected to report earnings on July 28, but the calls are dated so far into the future that it’s not necessarily a play on an earnings beat or miss.

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


Related Links:

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