I wrote a put on American Express (AXP).
music selection: “Scars” — Papa Roach
weigh-in: 213.6 (2.6)
American Express is a great credit card company to own. It has a closed loop as both the card and the processor so it earns more fees than Visa or Mastercard. It also charges cardholders an annual membership fee for an extra revenue stream. It’s customers are more affluent than those of other cards and it has superior collection results as a result.
Operating margins are around 25% and annual free cash flow is close to 8 billion a year. The P/E is a lowly 11.65. I think AXP is being unfairly punished by a market that is high on alternative forms of payment like PayPal, Apple Pay, and crypto-currencies. I’m getting in.
I sold AXP160916P00065000 for 1.09 a share. The trade will be in force for 40 days and yields 15.3% on an annualized basis while enjoying 2.46% downside protection.
Devour your prey raptors!