Altria Stock Options Pop After Goldman Sachs Upgrade

There's a renewed interest in calls after the bull note

Deputy Editor
Mar 22, 2022 at 1:05 PM
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Goldman Sachs today said that tobacco concern Altria Group Inc (NYSE:MO) is a potential winner for investors amid the ongoing war between Ukraine and Russia. The firm upgraded Altria stock to "buy" from "neutral," and upped its price target to $57 from $48, saying that it's better positioned than competitor Philip Morris International (PM), thanks to its defensive, domestic-focused business.

Coming into today, analysts were hesitant toward Altria Group stock. Of the nine in coverage, six carried a "hold" rating on the equity, with three recommending a "strong buy." Meanwhile, MO's 12-month consensus price target of $54.61 is a 3.2% premium to current levels of trading. 

Call traders are taking notice of the bull note, too. At the halfway point, 31,000 calls have already crossed the tape, which is double what's typically seen at this point and around seven times the amount of puts traded today. New positions are also being bought to open at the most popular contract, the weekly 3/25 54-strike call.

Drilling down, it looks as if one investor bought 2,000 contracts on the April 55 call for a volume-weighted average price (VWAP) of 22 cents. If this is the case, breakeven for the call buyer at the close on Friday, April 14, is $54.78 (strike less premium paid). 

It’s also worth noting Altria stock's Schaeffer's Volatility Scorecard (SVS) sits at 88 out of 100, meaning the equity has exceeded option traders' volatility expectations during the past year.

On the charts, MO was last seen up 1.4% to trade at $52.99, and earlier rose to $53.96 -- its highest level of trading since May 2019. Altria stock has steadily moved up the charts since bottoming out at an annual low of $42.53 in November, and now boasts an 11.7% year-to-date lead. 

MO Chart March 22


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