Since February the stock market correction began, Philip Morris international, Inc. (Ticker NYSE:PM) shares have had a tumultuous trading period. Shares in the state several times more than 10%. The end result was devastating slide as it is now 20% below the level of January.
Compare this with flat stock market, both Philip Morris and altria Group, Inc. Index (MO) stocks were destroyed. Meanwhile, hemp stocks like GW pharmaceuticals PLC (Nasdaq:GWPH) was much better and consistent with the stock market as a whole.
The reason for the recent drop in PM shares were to miss out on revenue. When they announced earnings, they beat on the bottom line but missed on the top line. This is my thesis.
This is not the first time they missed on revenues, but the fact that they were able to manage their p&L to hit the bottom line tells me that the management knows what to do. Today I’m betting on that to continue going forward. This means that there is a bottom of this correction in the PM stocks.
Later, the shares were brutal, but overall it was a downward spiral since may of last year, and now 30% from the highs. It’s possible that he rebounds to rally, but in General stock markets are nervous and near historical highs, I would prefer to leave room for error when you trade the drawback stock as the PM .
So I’ll use the betting options that the long-term support will ultimately keep. This will allow me to generate income without personal risk and leave a lot of room for error. Although I don’t need a rally to profit if they come my profit will be achieved faster.
Click to enlarge fundamentally the shares are not dilated. The company has a successful experience of transition material headers. The death of the industry was mistakenly called too many times. This too shall pass.
Technically, the shares of “Philip Morris” has strong support below $80 per share, which dates back five years. I will post my risk is even lower for more security and the best potential entry point of the action. If the price goes against my own personal stock even harder than the discount on the current price, which will not be a problem for me.
PM trade ideas
The trade: sell in PM Jan 2019 $65 naked put and collect $1.40 to open. Now I have 85% of the theoretical chance that I to preserve the gains. But if the price falls below my strike, I own shares and incur losses below $has a capacity of 63.60.
Selling naked puts is difficult, especially stock, as dysfunctional as it is. Those who want to mitigate this risk is to sell spreads.
Alternative transaction: Sell PM Jan 2019 $70/$65 bull put spread where I have similar chances of winning. Then the spread will yield a 17% risk.
Since there are no guarantees when investing in stocks, I never risk more than I can afford to lose.
Find out how to generate income from options. Nicolas Chahine-managing Director SellSpreads.com. At the time of this writing, he has not held positions in any of the above securities. You can follow him as @racernic on Twitter and stocktwits.