We’ve taken a look at Philip Morris stock a couple of times this year, first in early March when the stock was trading $110. We detailed a bearish trade idea (read here from March 9th) and were lucky to be there for a 16% one day drop in April from which we could close (April 19th) for a nice profit.
We then checked back in on the stock in early June (read here) and detailed a bullish trade idea to take advantage of the stocks oversold condition. Here was that trade, from June 8th:
PM (79.20) Buy July 80 / 87.50 call spread for 1.50
-Buy 1 July 80 call for 1.80
-Sell 1 July 87.50 call at 30 cents
The stock has been all over the place the past few days following an earnings release that cut sales forecasts but that has since found buyers. Today PM is trading 84 and this call spread is profitable, worth just under $4 versus the initial 1.50 at risk. Therefore it makes sense to close the trade before the bell and book the profits.
It’s nice to get a stock right in both directions in such a short period of time, that largely resulted from what we thought were both over-bought, and then oversold conditions, making directional options structures desirable.