Visa (V) will be posting earnings today after the stock market closes. Here is an options trade to try and capitalize on any big moves the stock might have from the earnings news. We are looking for great earnings from the company, but if they disappoint, the trade is formulated to just about break even if the stock moves downward. Even better, if there is a more than four points move downward, (which will most likely happen if the news is bad) we make money. So its basically a can’t lose trade that you can bet big on.

If you are entering the trade, we recommend a minimum $2,500 investment. The higher the better. We are buying both calls and puts and we have a ratio of calls to puts. The ratio MUST be strictly adhered to, to make it a can’t lose trade.

If the stock is up 4 points, we are up about 23%, up 5 points, we gross about 31%. If the stock is down 5 points, we make 7% and for 6 points downwards, we make 14%. This is all before commissions, so that will affect your gains.

Remember one side of the trade will lose money, for instance, if VISA (V) soars tomorrow, the puts will lose money and vice versa, but again, net net, you make money.

Here is the trade.
The August 80 calls are currently going for $2.50 and the August 70 puts are going for $2.00. You will have to pay a few cents more on the ask side, but the spreads are not too wide. As a matter of fact, the calls now have a price quote of 2.44 and the ask price is 2.40. The puts though are going for $2.10 with a $2.00 price quote.

BUY 6 AUGUST 80 CALLS and BUY 5 AUGUST 70 PUTS. This will run about $2,460. Keep the ratio constant. It’s basically a can’t lose trade as stated above, so you can double, triple or whatever your capital base allows. Do maintain ratio. You can buy 12 calls, 10 puts, 24 calls, 20 puts etc.

If the price has changed by the time you enter this, you can still enter (today) unless VISA (V) has moved up by more than say 5 points, which might change the volatility of the stock and the greeks on the options in which case, we need to reconfigure our ratio. If VISA is trading between 73-78 when you get this, you can enter the trade as is.

If you are entering the trade and would like a follow-up, email us at navivest@navivest.com with either a short message, or just Visa Trade on the subject line.

visa earningsvisa options