FDA Decision Could Spark Additional Downside for Philip Morris Stock

Near-term options traders have been more call-heavy than usual on Philip Morris

Aug 8, 2017 at 12:33 PM
facebook X logo linkedin

Shares of tobacco giant Philip Morris International Inc. (NYSE:PM) have been hit hard recently by the Food and Drug Administration's (FDA) initiative to reduce the amount of nicotine in cigarettes. This troubling fundamental development has smacked PM below once-reliable support at its 60-, 80-, and 100-day moving averages, and this breach could have PM on course to revisit its former highs down around $102.




Despite the stock's technical breakdown, eight of the 10 brokerages covering PM rate it a "buy" or better -- indicating there is plenty of room for downgrades to send the stock lower. There's also very little short-covering potential, with only 0.6% of PM's float sold short.

Adding to the contrarian bearish outlook for the stock, PM has a Schaeffer's put/call open interest ratio (SOIR) of 0.67, which ranks in the 4th percentile of its annual range. This means speculative players have rarely been more call-heavy on underperforming PM, and the unwinding of these bullish bets could provide yet another headwind for the shares going forward.

Lastly, our recommended put has a leverage ratio of negative 8.1, meaning it will double in value on a 10.3% decline in the underlying shares.

Subscribers to Schaeffer's Weekend Trader Series options recommendation service received this PM commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.


Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on C3.ai calls
238.5% GAIN on Oracle calls



Rainmaker Ads CGI