Taking advantage of short term weakness in MO pricing.
music selection: “Word Up!” — Cameo
weigh-in: 206.8 +2.0
Altria shares have taken a temporary breather as investors digest the most recent financial results. In my opinion, investors are over reacting to the impact of new debt taken on for acquisitions. The acquisitions put MO in a great place to be a market leader in e-cigarettes and cannabis. The company sells a high margin, addictive product with great pricing power. Shares will be back. In the meantime, I am buying an in the money bull call spread.
On Friday, I used a combo order to buy MO190621C00050000 for 3.4417 dollars a share. I likewise sold MO190621C00052500 for 1.7917 dollars per share. The net debit on the spread is 1.65 per share. There is 2.50 between the strikes so as long as shares fall less than 1.05 between now and expiry, the return will be 51.52% or 330% annualized. My stop loss is set at a hard 50 cents. If the spread closes below that price, I will close the next morning. I will also exit early if I can get 2.38 per share, or 95% of the maximum term with significant time remaining.
A buy/write trade entered earlier is now down about 150 dollars due to the decline in pricing. I expect to retain shares at expiry and write a new covered call for additional income while I wait for price recovery. I should be able to collect the underlying distribution along the way as well for bonus return.
Devour your prey raptors!