Price Forecast:

Bullish Case: BTI's transition to reduced-risk products is showing promise, evidenced by decreasing implied volatility in the near term. This trend could enhance investor confidence and drive stock price recovery above $38 in the next quarter.

Bearish Case: Despite potential gains in reduced-risk markets, continued declines in traditional cigarette sales and regulatory pressures may offset growth, making BTI vulnerable to price drops below $34, particularly if earnings disappoint next quarter.

Potential Outcomes:

1. Continued growth in reduced-risk products (40% probability);

2. Regulatory challenges stymieing potential gains (30% probability);

3. Significant drop in cigarette sales leading to earnings misses (20% probability);

4. Unexpected market volatility affecting stock (10% probability).

Trading Oracle: Utilize a bullish put credit spread by selling the $37 put and buying the $35 put. Current implied volatility is elevated; exploiting this can yield a 66% probability of profit with a potential return of 33% (annualized 111%) over the next 32 days.

November 20, 2024