Will the 'Brexit' Beatdown Be Short-Lived For Oil Stocks?

The fallout from Britain's "Brexit" referendum has been severe, and crude oil has taken it on the chin. Energy stocks are sinking in sympathy with crude futures, among which are oil majors Chevron Corporation (NYSE:CVX) and Exxon Mobil Corporation (NYSE:XOM). Below, we'll survey the pair of oil stocks, as well as the sentiment landscape among options traders.

At last check, CVX was off 1.6% at $102.80. However, the stock remains a mere chip-shot from its annual high of $104.45, touched yesterday. What's more, the shares reside just above their 10-week moving average, which CVX has not closed south of since late February.

That said, sentiment toward CVX has been extremely bearish in the options pits. Over the last 10 days, traders have bought to open 2.76 puts for each call at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). The corresponding put/call volume ratio ranks just 10 percentage points from an annual peak. While some of these long puts may have been initiated by shareholders hedging, a capitulation among "vanilla" bears could result in tailwinds.

Now is an opportune time for short-term traders to purchase premium on Chevron Corporation. The stock's Schaeffer's Volatility Index (SVI) of 18% sits south of 94% of readings from the past year, suggesting relatively muted volatility expectations. Also, CVX's Schaeffer's Volatility Scorecard (SVS) of 93 indicates the options market has tended to underestimate the stock's ability to make big moves over the past year.

Short-term options are relatively cheap on XOM, too, from a historical perspective. The stock's SVI of 17% registers in the low 14th percentile of its annual range.

As with its sector peer, XOM has seen options buyers rush toward puts over calls over the last two weeks. Specifically, traders have bought to open 1.92 puts for each call at the ISE, CBOE, and PHLX. In addition, the stock's Schaeffer's put/call open interest ratio (SOIR) is 1.40, with puts outstripping calls among options expiring within the next three months.

Although Exxon Mobil Corporation is off 1.8% today at $90.13, it's had a strong 2016. Year-to-date, the oil stock has advanced nearly 16%, and could take a bounce off of its supportive 40-day moving average. If it does, an unwinding of negativity in options land could add fuel to the proverbial fire.

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