Traders Bet Big On Mastercard's Stock

Mastercard Inc MA gapped up Thursday morning and continued to move north throughout the day.

In the premarket, at 8:25 a.m., an institution placed a block trade for 526,301 shares of Mastercard at $360.98 per share, which cost a whopping $189.98 million.

Mastercard’s stock made a new all-time high of $401.40 on April 28 but dropped over 11% in the weeks following.

On Wednesday, Mastercard’s stock created a double bottom pattern near the $355 area and reversed course.

On Thursday, Mastercard regained the support of the eight-day exponential moving average that has been pressuring it down and by late afternoon the eight-day EMA was curling up indicating further upside may be ahead.

A number of options traders agree that Mastercard’s stock is headed higher and purchased over $1.87 million worth of calls. The traders all purchased calls with a Sept. 17 expiry indicating they believe Mastercard will trade higher over the next few months and not necessarily immediately.

See Also: Why Visa & Mastercard Investors Shouldn't Sweat Fed's New Debit Routing Rule Change

The Mastercard Option Trades: Below is a look at the notable options alerts, courtesy of Benzinga Pro:

• At 10:12 a.m., Thursday a trader executed a call sweep, above the ask, of 218 Mastercard options with a strike price of $370 expiring on Sept. 17. The trade represented a $463,032 bullish bet for which the trader paid $21.24 per option contract.
• At 10:16 a.m., a trader executed a call sweep, near the ask, of 204 Mastercard options with a strike price of $370 expiring on Sept. 17. The trade represented a $452,880 bullish bet for which the trader paid $22.20 per option contract.
• At 10:17 a.m., a trader executed a call sweep, above the ask, of 227 Mastercard options with a strike price of $370 expiring on Sept. 17. The trade represented a $507,118 bullish bet for which the trader paid $22.34 per option contract.
• At 2:13 p.m., a trader executed a call sweep, above the ask, of 202 Mastercard options with a strike price of $370 expiring on Sept. 17. The trade represented a $453,894 bullish bet for which the trader paid $22.47 per option contract.

Why It’s Important: When a sweep order occurs, it indicates the trader wanted to get into a position quickly and is anticipating an imminent large move in stock price. A sweeper pays the market price for the call option instead of placing a bid, which sweeps the order book of multiple exchanges to fill the order immediately.

These types of call option orders are usually made by institutions, and retail investors can find watching for sweepers useful because it indicates “smart money” has entered into a position.

When a block trade occurs, it indicates a hedge fund or institution has taken a position. A block trade always involves large sizing and is typically handled by a blockhouse outside of the open market. Because block trades don’t happen on the open market, the large size of the trades doesn’t create volatility in the stock being traded.

Like sweepers, block trades indicate “smart money” has entered a position.

MA Price Action: Shares of Mastercard were trading up 1.84% to $367.70 at end of market Thursday.

(Photo: Alina Kuptsova via Pixabay)