MO January 2028 Options Begin Trading

The article outlines two options strategies for Altria Group (MO) based on its current $65.02 share price: selling a $55.00 strike put for a $4.95 premium, offering a 9.00% yield if it expires worthless (69% probability) or a $50.05 effective purchase price, and a covered call strategy selling a $67.50 strike call for $5.10, projecting an 11.66% total return if MO is called away by January 2028. These strategies provide defined risk/reward profiles for investors seeking income or discounted entry, with implied volatilities of 22-24% slightly exceeding MO's 20% trailing actual volatility.

Analysis

The article details two specific, long-dated options strategies on Altria Group (MO), currently trading at $65.02 per share, highlighting opportunities for income generation or discounted stock acquisition. The first strategy involves selling a January 2028 cash-secured put at a $55.00 strike price for a $4.95 premium. This either secures a 9.00% return on cash (3.83% annualized) if the option expires worthless, an event with a 69% probability, or establishes an effective purchase price of $50.05, representing a 15% discount to the current share price. The second strategy is a covered call, selling a January 2028 call at a $67.50 strike for a $5.10 premium, which could generate a total return of 11.66% if the stock is called away. Alternatively, if the call expires worthless (a 54% probability), it provides a 7.84% yield enhancement. A key insight is the volatility spread: the implied volatilities of the put (24%) and call (22%) options are trading at a premium to the stock's 20% trailing twelve-month actual volatility, suggesting that option sellers are being compensated favorably for the risk they are undertaking.

Key Decisions for Investors

• Investors bullish on Altria Group but seeking a lower entry point could consider selling the January 2028 $55.00 put to either acquire shares at an effective cost basis of $50.05 or to generate a 9.00% return on the cash commitment.
• Current MO shareholders aiming to generate income with a defined exit strategy could sell the January 2028 $67.50 covered call, targeting a potential total return of 11.66% while accepting a cap on further upside.
• Given that implied volatility is currently higher than historical volatility, the environment is favorable for option premium sellers, though investors must weigh the attractiveness of the yield against the long-term commitment required by the January 2028 expiration date.