Best Stock on the Market

Put Butterfly on V on 2/27/2013

Visa Inc. (Visa) is a global payments technology company that connects consumers, businesses, banks and governments in more than 200 countries and territories to fast, secure and reliable electronic payments. The Company operates processing networks, VisaNet, offering fraud protection for consumers and assured payment for merchants. The Company operates an open-loop payments network, a multi-party system in which Visa connects issuing financial institutions, or issuers, that issue cards to cardholders, and acquiring financial institutions, or acquirers, that have the banking relationship with merchants-and manage the exchange of information and value between them. The Company derives revenues primarily from fees paid by its clients based on payments volume, transactions that it processes and other related services the Company provides. Its clients deliver Visa products and payment services to consumers and merchants based on product platforms it defines and manages.


Stockwinners is bearish on this name for the following reasons:

  1. Visa’s multiple is near all-time highs, at a time when sales and earnings growth are expected to be lower than they have been over the past 3 years.  Also, at this point, Visa is a $100 billion market cap company, and size alone usually implies a lower multiple given the difficulty of growing earnings as size increases.
  2. The trade is structured to be profitable in a very large range and offers an attrative risk/payoff ratio.

Note: execution is a key factor in this trade.

Trade: Buy 1 April 140/150/160 Put Butterfly for less than 2.10

Trade

  • Buy 1 April $160.00 Put at $4.69
  • Sell 2 April $150.00 Put at $1.63
  • Buy 1 April $140.00 Put at $0.69
  • For a net debit of $2.12

Profit/Loss Analysis

  • Breakeven at $142.12 and $157.88
  • Maximum profit is $788.00 at strike of $150.00
  • Maximum loss is ($212.00) at strike of $160.00

Closing Summary

  • Sold 1 April $160.00 Put at $0.26
  • Bought 2 April $150.00 Put at $0.03
  • Sold 1 April $140.00 Put at $0.01

Position closed on 4/18/2013 at price of $0.21 with a -90.09% loss in 50 days.

Updates

4/18/2013 1:47:43 PM

We were on the wrong side of this trade. We are closing the position with a loss.

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