Collect Income on Altria While it’s Down

There is enough support to carry MO through bad news

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This morning, I am recommending a bullish trade on Altria Group, Inc. (NYSE:MO).

MO may start trading lower after some damaging news about one of its subsidiaries’ marketing practices, but I think the stock has enough support to keep it above the strike price for the put write I’m recommending.

If that is the case, a small drop in MO’s price gives us a good chance to generate income before it starts to recover.

Philip Morris Social Media Campaigns

Philip Morris (NYSE:PM), an MO subsidiary, had to suspend a social media campaign after a Reuter’s inquiry into the company’s use of social media influencers under the age of 25 to market products. Though PM didn’t break any laws, the company did violate its own internal marketing guidance, which called for the use of influencers over the age of 25.

Now, several anti-tobacco health groups are pushing tech companies to curb tobacco advertising on their platforms. It’s never good when a company violates its own internal marketing policies, and this story gives anti-tobacco health groups a talking point, which is bad for PM’s image. As a subsidiary of MO, it’s only natural for this story to affect the parent company.

Support Under $51 and at $48

But while the news may be bad for MO, the technical picture is promising. Back in late January, MO dropped in the lead up to its earnings report. Even though the company missed earnings expectations, it formed a bottom and started to recover.

Daily Chart of Altria Group, Inc. (MO) — Chart Source: TradingView

Throughout February, the stock encountered resistance just under $50, but it also found support at around $48. In late April and early May, MO started seeing support just under the $51 level.

With both of these support levels built in, I think MO will continue to trade above the $47 strike I’m recommending through the month of June. To take advantage of this support, I recommend selling a put.

Sell to open the MO June 21st $47 put at about $0.30.

Note: There are several June expirations available for MO options. Be sure you are opening the monthly options that expire on Friday, June 21, 2019.

About Naked Put Writes

A naked put write is a bullish position in which you expect the price of the underlying stock to increase. If naked put writes are a new strategy for you, find a primer on how to execute them and how they profit here.

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Ken Trester is editor of the popular Maximum Options program. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.


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