Options Check-Up: Transocean, Chevron, Exxon Mobil

Analyzing recent option activity on RIG, CVX, and XOM

Nov 14, 2014 at 7:35 AM
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Among the stocks attracting attention from options traders lately are oil-and-gas issues Transocean LTD (NYSE:RIG), Chevron Corporation (NYSE:CVX), and Exxon Mobil Corporation (NYSE:XOM). Below, we'll break down how options buyers are positioning themselves, and how much speculators are willing to pay for their bets on RIG, CVX, and XOM.

  • It was a tough day for the energy sector yesterday, and RIG was no exception. By the time the dust settled, the stock was down 2.9% at $26.29, after earlier bottoming out at a fresh 10-year low of $25.75. Year-to-date, the shares have surrendered roughly 47% of their value, and both option traders and analysts have grown increasingly skeptical. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for example, the equity's 10-day put/call volume ratio has jumped to 3.69 from 2.60 since the start of the month, and now ranks in the highest percentile of its annual range. Meanwhile, the security's front-month options are pricing in pretty lofty volatility expectations at the moment, based on Transocean LTD's Schaeffer's Volatility Index (SVI) of 57%, which ranks just 14 percentage points from a 52-week peak.

  • Bearish betting has also been popular on CVX, as evidenced by the equity's 50-day ISE/CBOE/PHLX put/call volume ratio of 1.25, which ranks in the 96th annual percentile. Simply stated, puts have been bought to open over calls with more rapidity just 4% of the time over the past year. This shouldn't be too surprising, considering CVX has plunged 14% since topping out at a record peak of $135.10 in late July, and yesterday, gave back an additional 1% to close at $116.45. With Chevron Corporation's quarterly earnings report effectively in the rearview mirror, the stock's front-month options aren't pricing in a big move. In fact, the equity's SVI of 19% ranks in the middling 46th percentile of its 12-month range.

  • Option bulls, meanwhile, have set their sights on XOM in recent weeks. At the ISE, CBOE, and PHLX, the stock's 10-day call/put volume ratio of 1.76 ranks in the 74th percentile of its annual range, meaning calls have been bought to open over puts at a faster-than-usual clip of late. Presently, XOM's front-month options are priced at a relative bargain, per its SVI of 16%, which ranks lower than 71% of other such readings taken over the last 52 weeks. On the charts, Exxon Mobil Corporation has shed 9.6% since hitting an all-time high of $104.76 in late July, and yesterday, finished 0.8% lower at $94.66.

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