Altria Group (MO) 10/26/09 PriceWatch Alert With $17.01 Break Even

Posted: Monday, October 26, 2009 8:07 AM EDT
By: Market Intelligence Center Staff

Altria Group (NYSE: MO) ended the last trading session at $17.93. So far the stock has hit a 52-week low of $14.34 and 52-week high of $19.97. Altria Group stock has been showing support around 17.59 and resistance in the 18.35 range. Technical indicators for the stock are Neutral and S&P gives MO a very positive 5 STAR (out of 5) strong buy rating. MO appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a Jun '10 18 covered call (MO FS) for a net debit in the $17.01 area. That is also the break even stock price for this trade. This covered call has a 236 day duration, provides 5.13% downside protection and a 5.82% assigned return rate for a 9.00% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the MO Jan '11 15 Call (VPM AC) and selling the Jun '10 18 call (MO FS) for a $2.38 debit. The trade has a 236 day life and would provide 3.07% downside protection and a 26.05% assigned return rate for a 40.00% annualized return rate (for comparison purposes only). Altria Group has a current annual dividend yield of 7.47%. [ABR-Seven Summits Research]