Option Trade 
American Express Company (NYSE:AXP) Puts 
Thursday, January 21, 2016

**OPTION TRADE: Buy the AXP Apr 2016 60.000 put (AXP160415P00060000) at approximately $2.00. Place a pre-determined sell at $4.00.

Note: No protective stop losses added -- but if you wish to do so make it $0.80.

by Ian Harvey

January 21, 2016

Payment processor American Express Company (NYSE: AXP), together with its subsidiaries, providing charge and credit payment card products and travel-related services to consumers and businesses worldwide, will report its fourth-quarter results after the market close on January 21. Analysts forecast earnings of $1.13 per share, down from $1.39 during the same period last year.

In the last reported quarter, the company missed the earnings estimate by 5.3%. However, over the trailing four quarters, the average beat is 2.55%.

The stock has traded lower with the overall market so far in 2016, with shares falling 8.6% year to date.

AXP was recently trading at $63.54, down $24.88 from its 12-month high and $1.31 above its 12-month low. Technical indicators for AXP are bearish and the stock is in a strong downward trend. The stock has recent support above $62.25 and recent resistance below $65.55.

Higher costs and a strong dollar may push American Express to report a decline in profit for the third quarter in a row. Markets outside the United States account for about a sixth of the company's revenue. Investors will seek updates from the world's largest credit card issuer on new co-branded deals after the termination of several co-branded relationships hurt revenue last year. Fidelity Investments became the latest to drop its agreement with the Amex.

Fourth-quarter earnings are also expected to see a drag from higher, marketing, promotion and card member reward expenses as American Express tries to best position itself for long-term growth.

Earnings will also feel the drag of co-brand renewal cost (Starwood, Delta and others), a stress that will not just be limited to this quarter but will spill into 2016 too.

Another factor that might affect fourth-quarter earnings is a stronger U.S. dollar and the negative impact of rising interest rates on charge card profitability.

Of the 22 analysts who cover the stock, seven rate it a "strong buy", one rates it a "buy", 10 rate it a "hold", one rates it a "sell", and three rate it a "strong sell".

Harvey’s Options Volatility Indicator


Taking all the aforementioned factors into account, the company projected 2015 earnings per share (EPS) to be flat with or modestly down from the prior year. To be more specific, the company projects full-year 2015 EPS between $5.20 and $5.35.

Therefore, based on the facts above, and Harvey’s Options Volatility Indicator, the following option trade is recommended…..

**OPTION TRADE: Buy the AXP Apr 2016 60.000 put (AXP160415P00060000) at approximately $2.00. Place a pre-determined sell at $4.00.

Note: No protective stop losses added -- but if you wish to do so make it $0.

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