Tobacco Stock for Options Bulls to Light Up

Bull flagging on the charts, tobacco stock Altria Group Inc (NYSE:MO) has found support at its 20-week moving average, which coincides with both its Covid low and its anchored VWAP (AVWAP). The shares are also breaking above their 20-day moving average, with support at the 45-strike peak put level. Any potential resistance from the peak call level will evaporate during the standard January expiration.

 
An unwinding of pessimism from the brokerage bunch could give MO a boost, too. Of the 18 analysts in coverage, 13 carry a “hold” or worse rating.
 
Similarly, options traders have been more bearish than usual, and an unwinding of this pessimism could add tailwinds. Data at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows MO sports a 50-day put/call volume ratio that ranks higher than 92% of annual readings.
 
Those looking to speculate with options can do so for a bargain right now. Altria Group stock's Schaeffer's Volatility Index (SVI) of 20% stands in the relatively low 24th percentile of readings from the past 12 months, meaning options traders are pricing in low volatility expectations at the moment. Our recommended call has a leverage ratio of 8.6, and will double on a 12% rise in the underlying shares.