Option Trade of the Day: Philip Morris International (PM)
Yesterday was an odd day for the market. Stocks were mixed and that led to the Nasdaq finishing higher by 0.19%, the S&P was higher by 0.08%, and the Dow was down 0.16%. There were numerous stocks that I track that jumped three or four percent and there were others that were down three or four percent.
I even noticed stocks within the same sector where one jumped 4% and one dropped 4%.[hana-code-insert name=’adsense-article’ /]The sectors were evenly split yesterday with five higher and five lower.
The energy sector led the way with a gain of 1.56% and the industrial sector gained 1.02% as the second best performer.
The consumer staples sector was the worst performer with a loss of 0.75%.
My scans turned a little more bearish last night with 46 bearish signals and only 11 bullish signals.
The bearish skew caused my barometer to drop to -22.3.
One name on the bearish list was Philip Morris International (NYSE: PM). If you are a regular reader of my articles, you may have seen PM in the trade ideas before as I suggested puts on the stock on January 26 and again on March 8.
We are seeing the same pattern again and I am looking for another 10% drop or more. The cyclical decline has worked for us before and I am willing to try it over and over until it doesn’t work.
Buy to open the June18 105-strike puts on PM at $5.00 or better. These options expire on June 15. A 10% drop from the high on Tuesday would put the stock down around $93 and would make these options worth $12. From $5 to $12 would be good for a 140% gain.
— Rick Pendergraft[hana-code-insert name=’IAlley article’ /]