MO Extends Losses Amid Possible Nicotine Level Cap

MO options can be had for a bargain currently

Deputy Editor
Apr 20, 2021 at 10:09 AM
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Tobacco stock Altria Group Inc (NYSE:MO) is under pressure today, one of many in its sector reeling amid reports from the White House dealing with nicotine levels. According to the Wall Street Journal, U.S. President Joe Biden's administration could potentially cap nicotine levels in cigarettes, a decision that comes just ahead of an approaching deadline in which public officials will decide whether or not to ban menthol cigarettes. In response, MO is extending yesterday's losses, last seen down 4.4% at $46.92.

On the charts, Altria Group stock yesterday logged its biggest percentage loss in just over a year, falling below $49 for the first time since mid-March. The 20-day moving average, which already caught pullbacks over the course of the year, is now sitting firmly above the security. Still, year-to-date MO is up 19.7%.

For those looking to speculate on Altria Group stock's next move, options could be the way to go as premiums are relatively cheap at the moment. The equity's Schaeffer's Volatility Index (SVI) of 27% stands higher than just 15% of all other readings in its annual range, implying options players are pricing in fairly low volatility expectations at the moment. 

It looks like many traders have already taken the options route, with 21,000 calls and 30,000 puts across the tape so far -- seven times the intraday average. The weekly 4/23 45.50-strike put is the most popular, followed by the weekly 4/30 45-strike put, and positions are being opened at the former. 


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