American Express Plummets 4.4% Amid Trump's Credit Card Rate Cap Proposal – Is This the New Floor?

Summary
• American Express (AXP) trades at $358.99, down 4.42% from its previous close of $375.61
• President Trump's proposed 10% cap on credit card interest rates sparks sector-wide selloff
• Intraday range of $355.51–$361.96 highlights sharp volatility
• Options chain shows extreme leverage ratios (up to 703.78x) and explosive price swings

Today’s dramatic 4.4% drop in American Express reflects a perfect storm of regulatory uncertainty and sector-wide panic. With Trump’s 10% interest rate cap proposal sending shockwaves through financial services, AXP’s price action reveals a bearish engulfing pattern and a MACD histogram turning negative. The stock’s 52-week range of $220.43–$387.49 now faces a critical test as traders grapple with the implications of a potential regulatory overhaul.

Trump’s Credit Card Rate Cap Sparks Regulatory Frenzy
President Trump’s weekend proposal to cap credit card interest rates at 10% has triggered a liquidity crisis in the financial sector. The move, which targets high-margin credit card operations, has directly impacted American Express’s business model. With AXP’s 52-week high of $387.49 now 7.5% below current levels, the market is pricing in a potential erosion of profit margins. The 10% cap would disproportionately affect subprime lending, a segment where AXP’s rewards-based model relies on interchange fees. This regulatory overhang has created a self-fulfilling prophecy: as investors sell off, the stock’s technicals deteriorate, amplifying the downward spiral.

Financial Services Sector Reels as Credit Card Firms Lead the Sell-Off
The financial services sector is in freefall, with Capital One (COF) down 7.5% and Synchrony Financial (SYF) falling 8.17%. American Express’s 4.4% decline aligns with the sector’s average 5.5% drop, reflecting a synchronized bearish response to regulatory risks. Unlike fintech disruptors like Affirm (AFRM), which may benefit from a shift to buy-now-pay-later models, legacy credit card issuers face existential threats. The sector’s P/E ratio of 24.9x now appears overvalued against the 9.5x benchmark of the US Consumer Finance industry, signaling a potential valuation correction.

Options Playbook: Leverage 700x Contracts and ETF Alternatives
• 200-day MA: $320.32 (below current price)
• RSI: 50.09 (neutral)
• MACD: 3.23 (bearish crossover)
• Bollinger Bands: $370.36–$387.35 (price at lower band)

Key levels to watch include the 200-day MA at $320.32 and the Bollinger Band lower bound at $370.36. With RSI hovering near neutrality and MACD signaling bearish momentum, the short-term outlook favors a continuation of the downtrend. The options chain reveals two high-conviction plays:

• AXP20260116C360
- Call Option, Strike $360, Expiry 2026-01-16
- IV: 33.93% (moderate), Leverage: 68.37%, Delta: 0.48, Theta: -1.667, Gamma: 0.028
- Turnover: $391,360 (high liquidity)
- This contract offers a 68x leverage ratio with a delta in the optimal 0.3–0.6 range. The high gamma (0.028) ensures sensitivity to price swings, while the -1.667 theta indicates aggressive time decay. Under a 5% downside scenario (targeting $341), the payoff would be $19 (max(0, 341–360)).

• AXP20260116C362.5
- Call Option, Strike $362.5, Expiry 2026-01-16
- IV: 32.89% (moderate), Leverage: 89.73%, Delta: 0.41, Theta: -1.476, Gamma: 0.028
- Turnover: $112,599 (solid liquidity)
- This 89x leveraged contract balances risk with its 0.41 delta and 0.028 gamma. The -1.476 theta suggests manageable time decay. A 5% drop to $341 would yield a $21.50 payoff (max(0, 341–362.5)).

Aggressive bears should consider AXP20260116C360 into a breakdown below $350. The options’ high leverage and gamma make them ideal for short-term volatility plays.

Backtest American Express Stock Performance
American Express (AXP) has demonstrated a positive performance following a -4% intraday plunge from 2022 to the present. The backtest data reveals that the 3-day win rate is 55.84%, the 10-day win rate is 58.87%, and the 30-day win rate is 63.64%, indicating a higher probability of positive returns in the short term after the intraday plunge. The maximum return during the backtest period was 5.76%, which occurred on day 59, suggesting that AXP has the potential for recovery and even surpassing its pre-plunge levels.

Regulatory Storm or Buying Opportunity? Here’s the 5-Point Action Plan
The 4.4% drop in American Express reflects a regulatory-driven selloff rather than fundamental deterioration. With the stock trading near its 52-week low and the sector leader Capital One (COF) down 7.5%, the immediate focus should be on $350 support. A break below this level could trigger a test of the 200-day MA at $320.32. For contrarians, the 50.38% implied volatility on the AXP20260116P340 put option offers a 491x leverage play if the stock rebounds. Watch for a potential regulatory compromise by January 20—failure to resolve the cap could extend the selloff. Position sizing should prioritize liquidity, given the options’ high turnover and volatility.