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Altria Income Strategy: How to Play MO For the Next Month

|Includes: Altria Group, Inc. (MO)

 Looking at Altria I have been observing a nice run up for a stock with a real low beta. The lower a stocks beta, the slower it will move with in relation to the S&P 500 Index. That being said, I think it’s time to take some money off the table. The best way to do that without having to sell stock and risk losing the dividend is to sell some call options against our position. First, let’s see the chart to put a picture into perspective:

MOdailyChart Altria Income Play: Buy, Hold, and Covered Call | #MKT $SPX

We can see the stock is in a nice uptrend and there is a lot of demand for shares right now. I think that we should prepare ourselves for some sort of a profit taking pullback just in case by selling some call options against the position. In order to better explain this, let’s pull up the December option chain for the call options on Altria (NYSE:MO).

AltriaDec 09OptionChain Altria Income Play: Buy, Hold, and Covered Call | #MKT $SPX

Keep your eye on the 19 strike call option. I think that 19 is going to poise as major resistance for investors. By selling this call option, we hold it through the third Friday of December and must sell at 19 if it rises. However, we will keep the $0.43 per share (mid point of bid and ask and likely market price you will get filled at) on top be poised to collect any dividends if dividend dates are within that time.

If the stock falls below 19 on expiration, we keep the shares, we then keep the $0.43 per share, and can write (sell) another option at the 19 strike if necessary for January to enhance our income even more!

Just my thoughts but good luck and happy trading!

Disclosure: No Positions


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