Weekend Trader Alert
September 4, 2022
Open Positions Update
- The Freeport-McMoRan (FCX) October 21, 2022, 28-strike call reaches its time-stop this Tuesday, September 6. Close the position at a limit price within range of the current market price when you place the order.
The following is this week's recommendation:
Phillip Morris International (PM)Place a limit order to buy the Phillip Morris International (PM) November 18, 2022 97.50-strike put at a limit price within range of the current market asked price when you place your order. At the close on Friday, September 2, this option was offered at $6.70. PM closed at $94.53 on Friday, September 2.Do not attempt to enter this position after Tuesday's close.Please use the following guidelines to manage the position:- Exit the position if the option is at a 100% gain from your entry price.
- If the option has not reached its target profit by 3:00 p.m. Eastern time on Monday, October 3, close the position.
- If there is a change to the above closeout parameters, we will notify you in your regular Sunday evening communication.
The shares of Philip Morris International (PM) are slipping below their year-to-date breakeven level, after failing over the past two days at the 40-day moving average, which is starting to turn lower. Bounce attempts have also been thwarted by a trendline connecting the lows from March and November 2020, November 2021, and March 2022. What’s more, a bearish engulfing candle is breaking below recent consolidation, after it failed at a confluence of moving averages, as well as the 61.8% Fibonacci retracement of the stock's 2022 highs to lows. With this technical setup in place, we are recommending a new short position on PM.
Of the 17 firms covering Philip Morris International stock, nine carry a “buy” or better, while eight say “hold.” This leaves plenty of room for analysts to move in with downgrades going forward.
At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity carries a 10-day put/call volume ratio of 0.18, which sits higher than 19% of readings from the past 12 months. Furthermore, its 50-day put/call ratio sits at 0.32 and has been trending lower, which has typically produced downward pressure for the shares in the past.
It's also worth mentioning PM’s Schaeffer's Volatility Scorecard (SVS) sits at an elevated 95 out of 100, indicating the security has frequently exceeded option traders' volatility expectations during the past year. Our recommended November, 2022 97.50-strike put has a leverage ratio of 8.4, and will double in value on a 10.9% drop in the underlying equity.
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