Welcome to Extreme Investor Network, where we provide you with unique insights and strategies to help you make the most of your investments. Today, we’re focusing on American Express (AXP) and the bullish options trade that could potentially benefit from the current consumer spending trends.
As consumer spending becomes more focused, certain industries such as restaurants and travel are standing out. American Express is strategically positioned to capitalize on this trend with its focus on premium customers who continue to spend in these areas. Not only that, but AXP is also targeting a younger customer base and expanding its presence in international markets, leading to accelerated customer acquisition.
If we take a look at the chart of AXP, we see that it has had an impressive run over the past year, rallying nearly 60% from the October 2023 lows. Despite a recent 8% pullback from its peak, AXP remains in a strong bullish trend, presenting an attractive risk/reward opportunity for investors looking to add long exposure.
In terms of financials, AXP is expected to grow EPS at a rate of 15% and revenue at 9%, yet it trades at a 12% discount to the average S&P 500 stock. With net interest income and card fees on the rise, there is significant upside potential for AXP to trade back towards its 52-week highs and beyond.
When it comes to options trading, while implied volatility is not cheap, it’s also not overly expensive. In this scenario, a strategy to consider is selling the $225/$215 Put Vertical at a $3.90 Credit expiring on July 26. This trade involves selling the July 26 $225 Puts at $7.45 and buying the July 26 $215 Puts at $3.55, with a risk of $610 per contract if AXP is below $215 at expiration and a potential profit of $390 per contract if AXP stays above $225 at expiration, providing a 57% probability of profit on this trade.
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