Trader bets on more downside for tobacco giant.
Tobacco companies have had a rough year, amidst long-term sales declines and a decision to pass on major investments in the growing cannabis industry.
One trader sees some more downside, with a large put option trade on Altria (MO). On Thursday, over 9,500 contracts of the July 12th $49 put options traded, a 57-fold increase in volume on the option.
- This Industry is Exploding Faster Than It Has in 15 Years
1,700 people are moving to Central Florida every week.
And the numbers are only increasing as more and more people are banking the end of the pandemic drawing near.
And one company, which just received critical approval to list on a prestigious public exchange, could be on the verge of going on a huge run.
This option, with shares at $48, is already in-the-money. So while it expires in 15 days, the option can be exercised as long as shares are under the $49 strike price.
Any big down day for the tobacco company in the meantime should have a dollar-for-dollar move in the option as well. In short, this $1.50 option could go to $2.50 if shares drop from $48 to $47, although with so little time left on the option, there will be some noticeable loss of the remaining time premium.
Action to take: For a short-term bet on a falling market, the tobacco stocks have been a good place for a trade. For those with a longer-term outlook, buying into the tobacco space at these prices can get a good entry point, and historically high dividend yields relative to where shares of companies like Altria usually trade.