Altria Group Inc. (NYSE: MO) opened at $67.78. So far today the stock has hit a low of $67.30 and a high of $68.48. As of 11:00, MO is trading at $67.47, up 0.06 (0.1%).The stock has been relatively flat all year, with a recent dip to a 52-week low of $63.13 at the end of July. Tobacco is one of my favorite industries right now and MO looks like a good defensive buy right now, since people will continue to smoke no matter what happens on Wall Street. The tobacco industry should be more or less immune to the recent financial sector woes. Technical indicators for MO are bearish and steady, while S&P gives the stock a very positive 5 STARS (out of 5) strong buy rating.
For a bullish hedged play on this stock, I would consider an September bull-put credit spread below the $60 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk and leverage returns. For this particular trade, we will make a 6.4% return in less than 6 weeks as long as MO is above $60 at September expiration. MO would have to fall by more than 11% before we would start to lose money. Learn more about this type of trade here.
MO hasn't been below $60 since October and has shown support around $66 recently. This trade could be risky if there are litigation issues that crop up in the next month, but even if that happens, this stock has been finding support around its 200 day moving average around $67.
Brent Archer is an options analyst and writer at Investors Observer.
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Reader Comments (Page 1 of 1)
8-14-2007 @ 3:11PM
gumby said...
Yes MO is a good defensive stock. Smokers will continue to smoke in your face. You will walk and follow smoking idiots and their tailing plumes of second hand smoke wafting around. You are breathing the air they foul up. You are thinking about quarter to quarter earnings and not noticing the soot and paritculates getting into your lungs. MO is a great stock yeah!! I own MO and I appreciate a lot that more and more smokers are becoming more considerate for others as they smoke out of our ways. We are enacting bills that forbid smokers from smoking with kids in tow. Get the hint?? Firewood next...
8-17-2007 @ 11:41AM
Mike Board said...
Your such an idiot, who do you think will pay the taxes tobacco generates when they do ban smoking. YOU, probably will be the first in line complaining that your paying too much in taxes. I have seen all the crazy commercials on antismoking and think it is a joke.
8-20-2007 @ 4:35PM
Gumby said...
Mike Board
Your logic escapes from me... I am not trying to stop smokers . I am just trying to push smokers away to right places where they can smoke. Stop grumbling like a smoking baby..
8-20-2007 @ 4:46PM
Gumby said...
How many home foreclosures are made by smokers? Smokers spend hundreds if not thousands on cigarettes annually. If I were a loan agent, I would ask borrowers if they smoke. If so, I would consider them high risk borrowers or what you know as sub prime borrowers. You are more concerned about the taxes they pay on their packs than the mortgages they are paying on time. One way or other way, hmm? You are single dimensional whiskey delta!! With one eye... Nuts for your brains!!! Smokers can go ahead and kill themselves far away from us. I still own MO shares because people are still killing themselves. I am glad that they are helping with our taxes... So what?? What the grumbling about, you moron!! Go away , smoker wann a be!