MO Unusual Option Activity Report

At the beginning of 2021, I posted on some unusual option activity in Altria Group Inc (NYSE: MO). The activity was part of a bigger move in tobacco companies since early November. In fact, we’ve had several different tobacco companies on my Top-Down Friday list since that time. While I’ve chosen to have companies like Vector Group Ltd (NYSE: VGR) and Philip Morris International Inc (NYSE: PM) on the list, Altria has been a company that has been a favorite among option traders and today is no different.

MO Option Activity

The option volume on MO was sizzling today at over two times the 5-day average volume. The activity was pretty balanced between calls and puts at over twice the average and a put-to-call ratio of 0.435. The composition of the call and put volume was also very similar with over 60% getting filled at the ask for calls and bid for puts. Selling puts and buying calls are bullish trades. Here’s a breakdown of the significant activity:

• 7,380 contract combination on the 19 MAR 21 expiration filled in one print
  • Sold $40 put @ $0.09 against open interest of 8,651
  • BOT $46.50 call @ $0.37 against open interest of 291
  • BOT $47 call @ $0.25 against open interest of 467

Then the number of contracts trade for the $40 put was less than the open interest. That is an indication it was to close a long put. That long put was essentially reversed to buy the $46.50 and $47 calls. The $47 call is an indication of the potential for this stock to reverse a multi-year downtrend.

MO Technicals

MO appears poised to complete a major breakout and complete a long-term trend reversal. Since the sell-off in early 2020, the price of Altria has struggled to break the 61.8% retracement of the downtrend near $44. The price attempted to close above the level last week before fading back but is currently trading above it. A weekly close above this level would be an indication of a full retracement back to $52.