The Arena

The S&P 500 moved marginally lower today, at least by 2022 standards. I’ll say it though, it doesn’t hurt any less. As our accounts flutter in the wake of the current economic landscape I think its important to continue finding ways to take small chunks of money out of the market. Let’s all agree now that we’re going to avoid giving additional money to the market. Ok good, now that we’re in agreement. Journey with me to the tobacco fields as I consider Altria Group, Inc (MO) for today’s trade.

The Federal Reserve has suggested it doesn’t see raising rates having quite the impact on inflation they would have hoped. Surprise…Surprise… Therefore they’re thinking another .75 basis point hike at the next meeting should do just the trick. I’m confident it will ultimately get inflation under control but there could be staggering losses and a cycle of higher costs everywhere until that time comes.

I think somebody called this at some point, the government is coming back for all those stimulus checks. However, what we didn’t anticipate was every other company wanting to jump in. I don’t remember Apple sending me any money during the pandemic? Only kidding, guess we’ll see if this bear finally gives way to some bullish activity in the days ahead.

The Coach

Now before I tell you my consideration for today, please try not to laugh. I realize my bullish sentiment for this stock couldn’t come at a worse time with literally everyone jumping in to bash them. Although, I think once I share my thought process around it you’ll say something similar to the following, “Um, No, Absolutely Not”. But for those wild cards out there, I’m looking at Altria Group, Inc. (MO) for a bullish call spread.

My analysis has Altria Group, Inc. as a strong buy right now. The problem, tobacco use is being more strongly discouraged right now than ever before. I think long term Altria Group, Inc. doesn’t face much problem as tobacco will continue being used by a great many world wide. However, getting bullish with a long position here could spell trouble if Altria Group, Inc. continues lower.

That said, my though process is to capture any volatility increase as earning comes up later this month. Currently MO’s implied volatility percentage is about 36% and an earnings date about 15 calendar days away. Additionally, MO has seen some interestingly large candles these past few weeks so the range throughout the day could be potentially lucrative. Having said that, getting in at the high here means watching this bull call spread move lower. There’s your warning.

Can Altria make a small move higher or are these long wicks signaling us to head for the hills? Time will tell…

For more information on the state of Altria Group, Inc in the next few weeks here is some technical information from TradingView.com.

Altria Group Inc Stock Price Chart 7-12-22
Altria Group Inc Stock Price Chart 7-12-22

The Attack

I’m considering an ultra short duration bull call spread on Altria at this time. If volatility ramps up in the next few days, I’ll be looking to exit the position quickly. Moreover, MO has be trading against the market as of late so a sell off in the S&P when CPI data is released could be a nice boost to this spread. Conversely, should the CPI data come in better than expected, look out below. The long wicks to the upside in Altria don’t suggest the bulls are winning this battle. Give the bears a window and they should push this one lower.

What do you think? Can Altria get bullish with a shot of volatility or does this echo runnnn…runnn…runn..ru… Through the canyon? Let us know in the comments below.

Bullish assumption

Buy To OpenSell To OpenEntry OrderMax ProfitProb. of 50% Profit
19 AUG 22 42.5 Call19 AUG 22 45 Call$95.00$155.0059%

Bearish assumption

Buy To OpenSell To OpenEntry OrderMax ProfitProb. of 50% Profit
19 AUG 22 42.5 Put19 AUG 22 40 Put$85.00$165.0057%

God Bless,
Jeff

*This post is NOT a recommendation to buy, sell, or trade any security. The information provided within is strictly for entertainment. Traders or investors should always consult a registered financial professional prior to trading or investing.