Phillips 66 Stock Dips After Multi-Billion Dollar Buyout Deal

The equity sports affordably priced premiums right now

Digital Content Manager
Oct 27, 2021 at 10:41 AM
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The shares of Phillips 66 (NYSE:PSX) are down 3.2% to trade at $79.61 this morning, after the company announced it entered a definitive agreement with Phillips 66 Partners (PSXP) to buy its remaining units in an all-stock deal valued at $3.4 billion. The deal aims to simplify the refiner's governance and corporate structure, and is set to close during the first quarter of 2022.

On the charts, the security has struggled with overhead pressure at the $84 mark over the last few weeks, following a bounce off the $63 level in mid-September. The shares are now testing a floor at the 180-day moving average, though PSX remains up 69.8% year-over-year.

The brokerage bunch is mostly bullish towards the equity. Of the 12 analysts in question, seven carry a "buy" or better rating, while five say "hold." Plus, the 12-month consensus target price of $89.75 is a 12% premium to current levels.

The options pits are much less optimistic. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 50-day put/call volume ratio of 0.45 sits higher than 84% of readings from the past 12 months. This high percentile means that while calls outnumber puts on an absolute basis, long puts have been getting picked up at a quicker-than-usual pace during the last two months.

For those wanting to get in on PSX's next move, options look like the way to go. The equity's Schaeffer's Volatility Index (SVI) of 35% sits higher than 17% of readings from the past 12 months. This means options traders are pricing in low volatility expectations right now.

What's more, the security's Schaeffer's Volatility Scorecard (SVS) ranks at 91 out of a potential 100, meaning Phillips 66 stock tends to outperform these volatility expectations, which is a boon for potential buyers. 

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