Happy Thanksgiving to all my Barchart readers out there.
As you gather with family and friends today to share stories, drink, eat and be merry, I hope you have a holiday filled with gratitude and joy. With so many tragic events happening in the world right now, it’s hard to spend a day watching football and celebrating the good things in life, but tradition calls us to do the same.
My hapless Washington Commanders play later today against their longtime rivals, the Dallas Cowboys. Dak Prescott, please have mercy on my poor excuse for a team.
On Thursday and Friday, I write about unusual election activity in the markets. Today, I’ve provided five unusually active Wednesday trading options to help you get through the holiday.
Have a memorable day!
Altria Group
Okay, before you hand me over to the Surgeon General, I don’t recommend that you take up smoking or anything like that. However, Altria Group (MO) owns John Middleton, a producer of cigars under the Black & Mild brand. Millions were still enjoying cigars on special occasions like Thanksgiving the last time I checked.
As for Altria, while it might be the devil for many Americans if you’re an income investor, there aren’t many dividend payers better than MO. Currently yielding 9.5%, it has the highest yield in the S&P 500.
Normally, I’m not a fan of high yields because it’s often a sign of a troubled business, but Altria is anything but. Its free cash flow through the first nine months of 2023 was $5.92 billion, allowing it to pay $5.04 billion in dividends and buy back $732 million of its stock.
It may be a sin, but it is good.
Yesterday’s activity provided two possible options. December 1st $42 put and December 1st $41.50 call. The former had a ratio of Volume-to-Open-Interest (Vol/OI) of 8.35, the latter 1.52. The put has a very attractive annual return of 91.3%. However, the risk that the shares are placed with you is high.
Your net price paid based on its closing price of $41.19 would be $41.12, just pennies lower. With eight days until expiration, you could be looking at a loss with a move lower.
The call is the much safer play, with an ask price of $0.20 and a delta of 0.34078. MO stock would only have to rise 59 cents for you to double your money by selling the call before expiration. However, it would be even less (51 cents) for you to seriously consider exercising your option to buy at $41.50.
From a historical perspective, it is a good entry point.
Comcast
Even though cable is going out, millions of Americans will be watching one or more of the three football games on TV today — as mentioned earlier, I’ll be watching my team get beat by the Cowboys starting at 4:30 EST. — and the TV feed will be provided by Comcast (CMCSA) cable business, possibly over its Xfinity 10G network.
Comcast ended the third quarter (Sept. 30) with 32.29 million home broadband customers. It lost 18,000 broadband customers in the quarter. Despite the decline, its revenue increased by 3.8% to $6.37 billion.
To counter the slow churn on the broadband front, it continues to grow Peacock, its direct-to-consumer streaming platform. Its paid subscribers at the end of the quarter were 28 million, almost 80% higher than a year ago, with four million added in Q3 alone.
The unusually active option on my radar is the December 15 $44.50 call. With more than three weeks until expiration, the ask is just a $0.20, 0.4% advance on the $44.50 strike. You will pay more today for beer.
Again, the stock price must not rise above $44.50 for you to generate a profit in the trade. A move of $1.09 will double your money if you sell before it expires.
Airbnb
Maybe you and your party traveled to some neutral location and rented an Airbnb (ABNB) to accommodate all attendees. The world’s leading vacation rental provider can help with that.
The company just paid $200 million buy GamePlannerAI. It plans to use its generative AI to create a travel watchdog to deepen its user experience. Makes sense.
As for the option in question, I am looking at the March 15/2024 $185 call. It has 113 days to expiration with a Vol/OI ratio of 16.23. The ask was a $0.65, 0.4% premium on Airbnb’s stock.
Again, the cost to you is small compared to the money you spent on today’s big feast. Further, the stock only needs to appreciate to $10.82 to double your money if you sell the call before expiration. So, it’s another income play with an outside shot to exercise your right to buy the stock at $185.
Kraft Heinz
What would a Thanksgiving feast be without condiments supplied by Kraft Heinz (KHC)?
Kraft Heinz’s main products include Kraft Mac and Cheese and Heinz Ketchup. Of course, it has many other brands to sell to grocery stores. However, it is probably best known today for Warren Buffett’s holding company, Berkshire Hathaway (BRK.B), which owns 26.5% of the company.
Investors continue to question whether the Omaha billionaire will ever get a satisfactory return on his investment. My guess, like almost everything he touches, is a resounding yes.
As for the unusual pick activity for KHC stock, it had the second highest Vol/OI ratio on Wednesday at 71.86. The option in question: the December 1 $35 call. With eight days until expiration, the ask was $0.15, a down payment of just 0.4%.
Although I don’t consider short-term options, the downside of this one is minimal.
Mastercard
You have to pay for today’s festivities. Mastercard (MA) can help you do that.
The payment processor had two unusually active options yesterday: a December 8 $420 call and a January 19/2024 $415 put. The Vol/OI ratio of the former was 20.36, while the latter was weaker at 3.02.
With 57 days until expiration, I would sell the put as a potential income play. The bid of $10.60 is an annual yield of 16.6%. Interest rates are high now, but not that high. While currently in the money, a nice move over the next couple of months will allow you to keep the prize. If not, you are buying a small piece of a great company.
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At the date of publication, Will Ashworth did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. For more information, please see Barchart’s Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.