Weekend Trader Alert
January 8, 2023
Open Positions Update
- Close the LyondellBasell (LYB) February 17, 2023, 85-strike put on Monday, January 9. Close the position at a limit price within the range of the current market price when you place the order.
The following is this week's recommendation:
Altria Group (MO)Place a limit order to buy the Altria Group (MO) June 16, 2023 45-strike call at a limit price within range of the current market asked price when you place your order. At the close on Friday, January 6, this option was offered at $3.50. MO closed at $46.45 on Friday, January 6.Do not attempt to enter this position after Monday'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, February 6, close the position.
- If there is a change to the above closeout parameters, we will notify you in your regular Sunday evening communication.
Bull flagging on the charts, tobacco stock Altria Group (MO) has found support at its 20-week moving average, which coincides with both its covid low and its anchored VWAP (AVWAP). The shares are also breaking above their 20-day moving average, with support at the 45-strike peak put level. Any potential resistance from the peak call level will evaporate during the standard January expiration.
An unwinding of pessimism from the brokerage bunch could give MO a boost, too. Of the 18 analysts in coverage, 13 carry a “hold” or worse rating.
Similarly, options traders have been more bearish than usual, and an unwinding of this pessimism could add tailwinds. Data at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows MO sports a 50-day put/call volume ratio that ranks higher than 92% of annual readings.
Those looking to speculate with options can do so for a bargain right now. Altria Group stock's Schaeffer's Volatility Index (SVI) of 20% stands in the relatively low 24th percentile of readings from the past 12 months, meaning options traders are pricing in low volatility expectations at the moment. Our recommended June 45 call has a leverage ratio of 8.6, and will double on a 12% rise in the underlying shares.
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