3 Smoking-Hot Options Plays

I'm not a smoker, but unlike many nonsmokers I have no animus toward those
who partake in tobacco products. I also don't harbor any kind of grudge toward
tobacco companies, as they provide a legal product that consumers demand. In
fact, I embrace the industry for being able to deliver consistent profits,
outstanding share price performance and significant income streams to
shareholders via high dividend yields. In particular, I like the recent uptrend
in many of the standout companies in the sector, as it represents an opportunity
to bank some smoking-hot profits using out-of-the-money call options. Three
stocks with the potential to ignite your portfolio with call options are
Lorillard (NYSE: LO ), Philip Morris International (NYSE: PM ) and Reynolds
American, Inc. (NYSE: RAI ). Let's take a closer look at each one, along with
their out-of-the-money calls. Lorillard Yield: 4.48% Year-to-date gain: 41%
Lorillard is a U.S.-based cigarette maker, offering 43 different products under
the Newport, True, Maverick and Old Gold brand names. Lorillard sells its
products primarily to wholesale distributors, who then service retail outlets
and chain-store organizations. The stock has a hefty dividend yield of 4.48%
(based on the Oct. 13 share price). But the stunning thing about LO stock is
that its yield comes with a 41% year-to-date gain in the stock. Intrepid
investors who think the stock's upside isn't finished yet should check out
the LO Nov 120 Calls . Philip Morris International Yield: 4.68% Year-to-date
gain: 13% Philip Morris International is a name synonymous with tobacco
products, and for good reason. The company's portfolio of international and
local brands includes Marlboro, Merit, Parliament and Virginia Slims. Philip
Morris' global reach extends to approximately 180 countries in the European
Union, Eastern Europe, the Middle East, Africa, Asia, Latin America and Canada.
At a dividend yield of 4.68%, and a year-to-date gain of 13%, PM has certainly
lit up investors' portfolios. Get an enhanced dose of PM upside by buying the
PM Nov 67.50 Calls . Reynolds American, Inc. Yield: 5.42% Year-to-date gain: 19%
Reynolds American, Inc. sells its cigarettes under the Camel, Pall Mall, Winston
and KOOL brands. The company also sells a lot of smokeless tobacco products,
such as the Grizzly and Kodiak snuff brands. The tobacco giant's red-hot yield
of 5.42% puts it near the top of the three tobacco stocks listed here. And with
that yield, shareholders have also captured a year-to-date gain of 19%. That
combination makes RAI one great stock for capturing both dividends and share
price appreciation, but options players can possibly add to that upside via the
RAI Nov 40 Calls . All three of these out-of-the-money call options are bullish
bets on the continued upside in the tobacco sector. So, if you're ready to
light up your portfolio (and you're willing to take the risk), then go big on
big tobacco. At the time of publication, Jim Woods did not hold a position in
any of the aforementioned stocks.