I am bullish on American Express because of recent earnings from JPMorgan Chase & Co. (JPM) and Bank of America Corporation (BAC).
Why? J.P. Morgan and Bank of America shared the common thread of their mortgage related revenues being down significantly, and their credit card revenues being up. We continue to see economic data suggesting the consumer is back. We’re also seeing an increase in credit card usage. Unlike J.P. Morgan and Bank of America, American Express has no exposure to mortgage related issues.
American Express has earnings on the 20. They’re approaching $47 per share where there’s been some resistance. The earnings announcement may be enough to push through and start a new bullish run towards $50.
Many ways exist to play this expectation in the world of options trading. A simple protective put, the combination of the long stock and a long put, would make for a nice conservative low-risk strategy. A biased calendar strangle, with the long call being significantly longer term, and the long put would also make nice plays. What wouldn’t be a good play going into an earnings event is a limit to upside potential return and for a lack of risk management if there’s a downside move after the earnings event.
Whether you decide to set up a trade for the earnings event or not, it should be a very interesting event to watch. I’m going to go make some popcorn and get a soda.