Goldman Sachs Suggests Buying 1x2 Put Spreads on Visa Inc.

Goldman Sachs is out with a research report this morning, where it suggests that traders buy 1x2 put spreads on Visa Inc. V 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 September $75/65 1x2 put spread for 2% of shares. This hedge is profitable between $56.80 (-25%) and $73.23 (-4%), with peak performance if shares reach $65 (-14%) by September expiration. Investors who hedge risk being short two puts below $60, and risk losing premium paid on the hedge, 2% in this case, if shares close above $75 by September expiration. Visa Inc. is a global payments technology company that connects consumers, businesses, banks and governments in more than 200 countries and territories, enabling them to use digital currency instead of cash and checks.