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Option Brief: Altria Group Inc (NYSE:MO) is trading lower today, down 1% at $42.28. This move south comes on the heels of a downgrade (to "underweight" from "equal weight") issued by Morgan Stanley toward sector peer Lorillard Inc. (NYSE:LO), and overshadows the brokerage firm's $6 price-target hike to $42 for MO. Against this backdrop, put volume is once again soaring -- trading at more than five times the intraday average -- and per the equity's surging 30-day at-the-money implied volatility (IV), short-term options are in focus.
Specifically, the security's weekly 6/27 42-strike put has seen the most action, with 6,477 contracts on the tape thus far. The majority of these contracts have gone off at the ask price, IV is up, and volume outstrips open interest, all signs of buy-to-open activity. The volume-weighted average price (VWAP) for the puts is $0.21, making breakeven at this Friday's close -- when the options expire -- $41.79 (strike less VWAP). Profit will accrue with each step below here (on a move down to zero), while risk is capped at 100% of the premium paid, should Altria Group Inc (NYSE:MO) settle north of the strike at expiration.