Altria Group (MO) 11/6/09 PriceWatch Alert Down To $17.84 Break Even

Posted: Friday, November 06, 2009 8:04 AM EDT

Altria Group (NYSE: MO) closed yesterday at $18.67. So far the stock has hit a 52-week low of $14.34 and 52-week high of $18.73. Altria Group stock has been showing support around 18.36 and resistance in the 18.88 range. Technical indicators for the stock are Bullish 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 19 covered call (MO FT) for a net debit in the $17.84 area. That is also the break even stock price for this trade. This covered call has a 225 day duration, provides 4.45% downside protection and a 6.50% assigned return rate for a 10.55% 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 17.50 Call (VPM AW) and selling the Jun '10 19 call (MO FT) for a $1.08 debit. The trade has a 225 day life and would provide 0.48% downside protection and a 38.89% assigned return rate for a 63.00% annualized return rate (for comparison purposes only). Altria Group has a current annual dividend yield of 7.37%. [FBB-Seven Summits Research]

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