[Opening Straddle on Altria Grp (MO)]
Dear Member:
Yesterday, Altria (MO) announced an 18% drop in profits and cut forecasts. The implied volatility is in relatively low percentiles and is well below the statistical volatility. A move up in IV should increase the value of both puts and calls. I am placing an order to open a Dec 70 straddle on MO for a limit of $7.20. I am simultaneously buying the Dec 70 calls (MOLN) and the Dec 70 puts (MOXN) at a limit of $7.20. The position can profit with a sharp move in stock price in either direction or an increase in implied volatility or both. A 10% increase in IV by half way through the trade could make the trade profitable at that point.
DISCLOSURE: At the time of publication, I have no position in the referenced options or the underlying stock.
Sincerely,
Bill Kraft
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