Continuing to evaluate industries with a tendency to hold up well during tough economic times, today we will consider the players in the tobacco industry.
Even when the economy isn’t doing so hot, the tobacco industry generally continues to perform well, as tobacco smokers tend to continue to indulge in the product.
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The tobacco industry is one of the U.S.’s oldest. Tobacco has a long history as the Native American Indians smoked tobacco long before the Europeans smoked it.
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The adverse affects of tobacco on a smoker’s health have been well documented, but the industry continues to survive. The tobacco industry has been the target of many lawsuits in the last couple of decades and the litigious nature of the industry is expected to continue.
The country with the largest production of tobacco is China, followed by India, Brazil, and the United States, in that order.
Using PowerOptions stock options search tools we discovered the following covered calls stock options positions for tobacco related companies.
| PowerOptions Covered Call Search | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Sym |
Stock Price |
Option Sym |
Expire &Strike |
Opt Bid |
%Dnsd. Prot. |
%If Unch. |
%If Asgnd. |
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| UST | 55.69 (+0.29) | USTGK | 07 JUL 55.0 (67) | 2.45 | 4.4 | 3.3 | 3.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| AOI | 10.04 (+0.25) | AOIFB | 07 JUN 10.0 (32) | 0.35 | 3.5 | 3.2 | 3.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| UVV | 63.45 (+0.15) | UVVHL | 07 AUG 60.0 (95) | 5.30 | 8.4 | 3.2 | 3.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RAI | 67.08 (+0.36) | RAIHN | 07 AUG 70.0 (95) | 1.45 | 2.2 | 2.2 | 6.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The RAI covered calls position has the largest potential return at 6.7%. To realize the 6.7% potential return, the price of RAI’s stock must increase to or above the call options $70 strike price at options expiration.
Even if the price of UST, AOI, UVV and RAI remain unchanged at options expiration, the positions will return 3.3%, 3.2%, 3.2%, and 2.2%, respectively.
The position with the largest downside protection is UVV at 8.4%. As long as the price of UVV’s stock does not decrease more than 8.4% at stock options expiration, the position will remain profitable.
Competitors:
Competitors for UST include: Altria Group Inc. (MO), Altadis, S.A. (private), and Swisher International, Inc. (private).
Competitors for AOI include: British American Tobacco plc (BTI), Universal Corp. (UVV), and Altadis, S.A. (private).
Competitors for UVV include: Alliance One International, Inc. (AOI), British American Tobacco plc (BTI), and Altadis, S.A. (private).
Competitors for RAI include: British American Tobacco plc (BTI), Carolina Group (private), Philip Morris USA Inc. (private), Altria Group Inc. (MO), Star Scientific Inc. (STSI), and Vector Group Ltd. (VGR).
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[tags] Altadis, S.A., Swisher International, Inc., Carolina Group, Philip Morris USA Inc., AOI, Alliance One Intl. Inc., BTI, British American Tobacco plc, MO, Altria Group Inc., STSI, Star Scientific Inc., UVV, Universal Corp., VGR, Vector Group Ltd., covered call investment strategy, investment strategy, iron condor, poweroptions, stock option trading, stock options [/tags]