As we were watching the market live last Tuesday during the Lighthouse Point Webinar, we noticed the momentum start to turn negative. We jumped in Mastercard ($MA) after analyzing the charts and options markets and looking at their main competitor Visa($V). On Tuesday Aug 8th, we noticed the stock trying to break through some resistance and failing and with the market turning negative MA seemed like a cheap play.
With stock trading around $129.85(from webinar) we could see that the August 17 calls(10 days to go) were trading for $1.25. You can see on the chart below the entry day labeled with the number (1).
On Thursday Aug 10th the stock dropped to below 128 and found support from the July 28-31 area. Around 10:15 we sent out a notice to suggest to either exit the $130 puts or roll the 130 puts down to the 126 puts to lock in profit. Number (2)
We were able to sell the original calls bought for $1.25 for $2.23. So for those that exited with no roll they would have profited roughly $0.98 or 78% ROI in two days. For the people that rolled and gave themselves a chance for an extended move below (assuming those puts go to zero) you could have made ($2.23-.55) or $1.68. This works out to be a $0.43 or 34% ROI.
Either way it is still a great return in 2 days.
Some traders in the platinum service went long with purchasing cheap calls from the reversal on Friday.
The Webinar snippet about Mastercard is below: