Unusual Options Activity on Altria Group Inc. (MO) and the Cannabis Play it May Represent

Tuesday, October 19

11AM ET: During Monday’s frenzy of bullishness, a couple notable orders slid by, masked by the massive orders we observed in the flow. Altria Group (MO), one of the world’s largest and most prolific tobacco producers, displayed options activity yesterday that is reflective of bullish sentiment. Now, it is worth noting that Altria will release an earnings report soon, scheduled for October 28th.

In the flow for MO yesterday, we saw multiple put orders come in, sold on the bid side. When a trader or investor sells a put contract at the bid side, it is somewhat similar to the “buying a call at the ask side” we’ve discussed before in the past. When a trader or investor sells puts at the bid, it shows a sense of urgency to get that fill. Selling a put allows a trader to profit as the stock price rises. The $75 put strike specifically received a lot of attention yesterday.

Targeting longer dated expiration dates of January 21, 2021 and June 17, 2022, the trader or traders sold these $75 put contracts with several hundred thousand dollars worth of premium. By aiming for put contracts that are deeply in the money, and for distant expiration dates, this trader (or traders) seems to be betting on upward stock movement in MO.

Given that time frame, this could make sense from a non-tobacco industry stance, as Altria Group is well on its way to becoming a cannabis giant, as well.

According to Forbes, Altria Group spent around $1.8 billion investing in cannabis company, Chronos Group (NASDAQ:CRON), a company with vested interest in the American cannabis industry. Not only this, but the tobacco giant has also been lobbying heavily for cannabis friendly legislation. For example, Altria began lobbying for cannabis in Virginia earlier this year, and officially registered to lobby, “issues Related to the Responsible and Equitable Regulation of Cannabis Sales in Virginia for Altria Client Services LLC and its Affiliates — Philip Morris USA Inc., John Middleton Co., U.S. Smokeless Tobacco Co., and Altria Summit LLC”.

Although this focus revolved around Virginia, Altria spokesperson has gone on the record with Cannabis Wire to support cannabis legislation on the federal level, as well, stating:

“Altria supports the federal legalization of cannabis under an appropriate regulatory framework.”

In addition to this, let us not forget the research and subsequent report issued to us by the friendly retail cartoon Whale himself regarding Congress, the Senate, and cannabis trading.

According to the report, numerous House members made purchases of cannabis-related stocks. Let’s take Virginia Foxx (R-NC), for example. As society and the government seem become more open to the idea of cannabis legalization, Representative Foxx has invested over $200,000 in Altria Group since 2020. This is despite the fact that tobacco has been in a downward spiral of public sentiment, and the fact that anti-tobacco advocates have been increasingly successful in disparaging the use of tobacco, and despite Representative Foxx’s, and the Republican party’s for that matter, staunch stance against legalization.

Across the aisle on the Democrat side, we see Representative John Yarmuth (D-KY) dropping a sizable amount of money, although given his party affiliation, his purchases are more directly related to cannabis. Rep. Yarmuth’s holdings since 2020 have involved Altria Group (MO), Aurora Cannabis (ACB), Tilray (TLRY), and Canopy Growth (CGC) (all of which have ties to the American Cannabis industry in some form or another).

Does this all mean that cannabis legalization is on the horizon? We can’t say. Despite increasing public support of legalization, there is still a battle waging both between and within both political parties on the topic. Numerous times, federal decriminalization (an important distinction from “legalization”) has made its way through the House only to be blocked by the Senate. While many in the government, and most within the public population of the United States, believe in the cause, we can only watch and wait.