Goldman Sachs Suggests Buying 1x2 Put Spreads on MasterCard

Goldman Sachs is out with a research report this morning, where it suggests that traders buy 1x2 put spreads on MasterCard MA to hedge debit reform. The analysts see short term risk to shares ahead of the Debit interchange deadline on July 21, 2011. While the analysts are bullish on the ultimate outcome for debit interchange, they also see ratio put spreads as attractive ways for investors to protect against downside risk. Goldman Sachs suggests buying the October $265/220 1x2 put spread for 2% of shares. This hedge is profitable between $182 (-34%) and $258.35 (-6%), with peak performance if shares reach $220 (-20%) by October expiration. Investors who hedge risk being short two puts below $220, and risk losing premium paid on the hedge, 3% in this case, if shares close above $265 by October expiration. MasterCard Incorporated is a global payments company that provides a economic link among financial institutions, businesses, merchants, cardholders and governments worldwide, enabling them to use electronic forms of payment instead of cash and checks.