MasterCard Incorporated (NYSE: MA) bull put spread

On February 4th, MasterCard Incorporated (NYSE: MA) posted disappointing earnings, which fell short of analysts’ expectations. This shortfall was mainly due to higher-than-expected costs. This announcement coincided with the ongoing correction in the S&P 500 Index (SPX), sending the stock sharply lower.

MasterCard did also announce that in 2010, it expects net revenue growth to be better than the 3.9% growth it experienced in fiscal 2009. The stock has been forming a bit of a base here and has not fallen below its 200-day moving average. This moderately bullish trade puts the breakeven below the 200-day moving average, which is perched around $209.00.

MA Credit Spread Trade Details:

MA is currently trading at $226.40.

Credit Spread/Bull Put Spread–

• Sell the March 210 put
• Buy the March 200 put
• Net credit of $1.50 for the spread

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

Profit/Loss Details:

Maximum profit: $1.50 (the credit collected).

Maximum risk: $8.50 (the difference between strikes minus the credit collected). Return on risk is approximately 17.6% in 39 days.

Breakeven: $208.50 (the strike of the short put minus the premium).

For more on MA:

Sector Update: Financials on the Rise Amid China Concerns, BAC probe

Put selling in MasterCard (NYSE: MA) post-earnings

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