Reynolds American Earnings Play Using Options

• Posted by Greg Harmon
• on July 21st, 2011

Last week I put up some ideas about trade set ups in tobacco stocks (link below). Two of those stocks Lorrilard Inc (ticker: $LO) and Altria (ticker: $MO) reported earnings recently. $LO is now breaking out and $MO is steady. A third name I mentioned was Reynolds America (ticker: $RAI) which reports tomorrow morning. I mentioned a hold of the channel being a bullish event. Now with the other tobacco stocks holding and moving up there is a trade opportunity for $RAI.

Bullish Risk Reversal buying the August 40 Strike Call and selling the August 37 Strike Put

As I write this the market is -0.15 cent bid/ 0.00 offer, so you can probably get a credit to do it.

This gives upside participation and an entry point at support on a pullback. Damn glad I started smoking.

Time to Start Smoking

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