Credit Cards Ride A Bullish Wave

Includes: DFS, MA, V
by: optionMONSTER

by David Russell

The bulls are going hog-wild for credit-card stocks.

Visa (NYSE:V) was the main target yesterday, and experienced a surge of activity in Weekly 95 calls designed to profit from a quick move to the upside. The buying started early for as little as $0.15, and at one point they appreciated more than tenfold to trade as high as $2.22. More than 13,000 contracts changed hands in the session against open interest of just 891, according to optionMONSTER's Heat Seeker tracking system.

The October 95 calls, which expire five weeks later, were also purchased for $2.2 to $3.24. Overall options volume in the name would be 8 times greater than average, with calls outnumbering puts by more than 2 to 1. And, those puts that did trade were mostly sold, which also reflects the strongly bullish tone.

V ended up by 3.12 percent at $92.84, and at one point traded as high as $94.75. That was its loftiest price since April 2010, when the stock hit an all-time high of $97.19.

Rival MasterCard (NYSE:MA) is already in uncharted waters, closing at a new record of $353.78-- up 1.67 percent in the session. Both companies are enjoying a broader secular shift toward electronic payments, and a continued to climb in the last two months, despite the broader market dropping the lows for the year.

MA's activity was also generally bullish, with calls bought and puts sold, but less frenetic than V's.

Discover Financial Services (NYSE:DFS), which was a popular name until about May, returned to the Heat Seeker in yesterday's session as well. Investors bought the January 2013 30 calls and the October 28 calls while selling the October 27 puts. Option volume in the stock was 8 times greater than average, and DFS closed higher by 1.98 percent to $26.79.

American Express also saw a generally bullish activity on modest volume. All four stocks have rising 200-day moving averages and closed above those moving averages yesterday-- something that cannot be said for the S&P 500. The credit cards are especially bullish in contrast with most other financials, many of which are far below their 200-day moving averages and near multi-year lows.

Disclosure: No positions