MO – Altria Group, Inc. – Rampant put buying ensued on Altria Group, Inc. late in the trading day with shares of the owner of Phillip Morris International, the cigarette manufacturer, down 0.65% to $20.07 just before 3:20 pm (ET). Yesterday the largest U.S. tobacco company sold $800 million of 5.25-year notes. Investors wary of continued erosion in the price of Altria’s shares through July expiration scooped up roughly 40,000 puts at the July $19 strike for an average premium of $0.34 per contract. Investors holding these contracts make money – or alternatively realize downside protection on a long underlying stock position – if shares trade beneath the average breakeven price of $18.66 by expiration day next month. Investors seeking more immediate protection purchased 10,000 puts at the higher July $20 strike for an average premium of $0.66 each. Higher-strike put players face an average breakeven share price of $19.34. The sudden surge in demand for put options on MO lifted the stock’s overall reading of options implied volatility 12.8% to 27.27% by 3:27 pm (ET).
Affiliation: Interactive Brokers
Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
Interactive Brokers: Interactive Brokers offers direct market access to around 80 electronic global markets from a single account. Successful traders and investors understand that superior technology and lower trading costs can result in greater returns. For 32 years we have been building direct access trading technology that delivers real advantages to professionals worldwide. With consolidated equity capital of US $4.4 billion, IB and its affiliates exceed 1,000,000 trades per day. In addition, our prudent and conservative risk policies make Interactive Brokers a safe haven for your money. Discover some of the reasons why IB, the largest independent US broker/dealer, is the professional traders' and investors' choice.
Visit: Interactive Brokers