Dykstra: Altria Call Options Are Smoking

Imagine a brand that establishes market dominance such that the product becomes synonymous with the brand. Then the government forbids any further advertising for that product. Any "new-and-improved" variation of that product may as well remain on the drawing board, because there is no way to adequately disseminate its "virtues" without advertising.

So the brand that dominated the marketplace prior to the advertising ban will undoubtedly remain etched in the public consciousness in regard to that product. Cigarettes are that product; Marlboro is that brand. Altria (MO Quote), the former Phillip Morris, is the company that owns the brand.

This is a perfect segue into today's deep-in-the-money call. We will use Altria, which closed at $84.84 on Thursday, as our deep-in-the-money call play. The play is a buy of 10 of the June $75.00 (MOFO) deep-in-the-money calls (10 calls equals 1,000 shares).

This is an excellent example of our strategy; if we were to buy 1,000 shares of Altria common stock, we would need to "dig deep" and come up with approximately $85,000, opposed to $10,500 for the June $75 strike price.

This particular strike traded as high as $11.20 yesterday, but closed the day at $10.70. We will put our good-till-cancelled (GTC) buy order in at $10.50, using a limit order.

There's lots to like about Altria.

< Previous

1 2 3 4

Next >