Pre-Earnings XOM Options Bears Could Triple Their Money

The oil major will report earnings next Friday, Nov. 1

by Lillian Currens

Published on Oct 25, 2019 at 11:22 AM

Blue chip Exxon Mobil Corporation (NYSE:XOM) is trading modestly higher today, up 0.2% at $69.24, though continued pressure from its 40-day moving average is thwarting the stock's attempt to break free from its year-to-date lows in the $66-68 region. Another trendline, in the form of the equity's 70-day moving average, is sitting just above, and could spell trouble for the oil-and-gas producer, if history is any indicator.

XOM Oct 25

According to a study from Schaeffer's Senior Quantitative Analyst Rocky White, there have been five other times in the past three years XOM has run up to its 70-day moving average. The energy stock was lower three weeks later after each signal, averaging a  loss of 5.3%. A similar move would put Exxon just atop the $65.50 level -- site of its Dec. 24 close.

Plus, history suggests that put buyers could bank a big profit on this bearish technical signal, should the stock's Schaeffer's Volatility Index (SVI) hold near its two-year average of 25.6%. In fact, White's data shows that an at-the-money XOM put option could potentially return 204% over the next 10 days on another expected decline from its 70-day trendline. The security's SVI was last seen at 22%, which ranks in the 36th percentile of its annual range.

What's more, Exxon Mobil is set to report third-quarter earnings before the market opens next Friday, Nov. 1. The Dow stock has a dismal history of earnings reactions, which doesn't do much to help its case. Based on next-day moves from the last two years, XOM has only been positive after three of the past eight reports, averaging a single-session swing of 2.5%, regardless of direction.


A Schaeffer's exclusive

6 Sectors for Summer

Access your FREE insider report before it's too late!


  
 

Partnercenter


NEW! Explore Schaeffer’s Partners' deals and get connected to top online brokerages with deals tailored exclusively for our readers.  Get answers to your questions regarding transfer fees, commission rates, programs and available discounts related to online trading services.

MORE | MARKETstories


3 Million to Lose Jobs – and Not Because of Coronavirus?
A terrifying new trend can make you a millionaire or destroy your financial future.
Wall Street Reclaims Two Key Trendlines This Week
U.S.-China tensions and dire economic data still weigh, though
Dell Stock Jumps on Upbeat First Quarter
DELL announced an upbeat first-quarter report
Research Exposes Shortcut to Stock Market Wins
A simple way to stop picking losers, and start cashing in like Wall Street's elite.