Altria Unusual Option Activity Report
What a crazy start to the new year and the unusual option activity in Altria is fitting. I say fitting in that after 2020, many people are looking at something to calm the nerves and take a break from the chaos. As we deal with election news, many may be looking to take up smoking. Over the past two days, traders have been doing so through purchasing call options on Altria Group Inc. (NYSE: MO).
In early December, it looked like tobacco companies like Altria, Philip Morris (NYSE: PM), Vector Group (NYSE: VGR) and Turning Point Brands (NYSE: TPB) were poised to take off. However, Santa didn’t come for these companies and their share prices fell heading into the new year.
However, that has changed for VGR and TPB as their share prices are surging today. Also, the bullish option activity in MO is picking up steam.
Altria Option Activity
The options volume is sizzling on MO today. At the time of this writing, it was over three times the average so far today. Most of the volume is occurring on the calls as the volume is over 4.5 times the 5-day average. The put to call ratio is 0.095. The call volume has had 55% of the trades occur at the ask price, which is reflective of call buying activity. Here’s a look at the significant activity over the past two days.
- Jan 5—2,500 29 JAN 21 $44 calls mostly BOT @ $0.30 to $0.36 against open interest of 537
- Jan 6—22,000 29 JAN 21 $44 calls mostly BOT @ $0.29 to $0.38 against open interest of 3,208
The activity over the past two days has been bullish and is looking for a near-term move in Altria to $44 or higher. The option expiration also aligns with the earnings announcement for the company on the same date before the market opens.
Altria Technicals
The stock price of Altria failed to breakout above the $44 resistance from August. The high day of December 18, 2020 closed near the high of the session on significant volume before falling back to its $40 support. The coincidence of the $44 strike price aligning with the resistance at the same price is interesting. The option activity is anticipating a breakout above that level.
A breakout and weekly close above $44 could be an indication of a longer-term reversal in the trend of MO. Given the company currently pays an 8.33% dividend, it adds even more interest to the total return of a rise in the share price plus the dividend. A retest of the 52-week high near $52 seems reasonable in the coming weeks to months.
Conclusion
The option activity in Altria is fitting given its valuation, dividend yield and the need for investors to find something that will work in coming months. The movement in some of the other stocks in its industry and the option activity in MO is a bullish combination. Also, the good thing for those just seeing the option activity is that the stock hasn’t moved yet and may start to catch up with TPB and VGR.
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