A Visa Inc. (NYSE: V) bull put spread

Many investors incorrectly assume that a company like Visa (NYSE:V) has exposure to the downside of consumer credit, namely default rates. But V is actually in the financial technology and transaction business and continues to see steady growth as its brand and services dominate online shopping and payment systems.

They build “tollbooths” for the internet economy and are a favorite of equity portfolio managers, but their institutional ownership stands at only 48%. For investors who believe in their growth story, they might consider a bull put spread to generate revenue off of this name.

V Credit Spread Trade Details:

V is currently trading at $83.44.

Credit Spread/Bull Put Spread–

• Sell the March 80 put
• Buy the March 75 put
• Net credit of $1.15 for the spread

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize this trade.

Profit/Loss Details:

Maximum profit: $1.15 (the credit collected).

Maximum risk: $3.85 (the difference between strikes minus the credit collected). Return on risk is approximately 30% in 39 days.

Breakeven: $78.85 (the strike of the short put minus the premium).

For more on V:

Sector Update: Financials

Volatility Plays on Visa Inc. (NYSE: V)

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