Exxon Mobil Corporation (XOM) Options Hot as Energy Stocks Soar

Exxon Mobil Corporation (NYSE:XOM) is flying high today as oil stocks surge on an output agreement, and options volume is accelerated

Dec 12, 2016 at 2:37 PM
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Shares of Exxon Mobil Corporation (NYSE:XOM) are soaring -- trading near levels not seen since July -- as oil prices rally on an output agreement among global crude producers. Additionally, rumors are swirling that President-elect Donald Trump is expected to nominate XOM CEO Rex Tillerson as his secretary of state. Against this backdrop, XOM stock is up 2.5% to trade at $91.24 -- and options volume is running at two times the average intraday rate, with more than 86,000 contracts on the tape.

Diving deeper, around 59,000 calls have traded on XOM so far, compared to roughly 27,000 puts. The January 2017 90-strike put has seen the most action -- with 7,405 contracts traded -- followed by the January 2017 92.50-strike call, which has seen 6,415 contracts cross the tape. There appears to be some buy-to-open activity occurring at each back-month strike, too. If this is the case, the put buyers expect XOM stock to retreat back below $90 by expiration at the close on Friday, Jan. 20, while call buyers are betting that the energy stock will break out above $92.50 over the next six weeks. Risk to either set of options buyers is limited to the initial premium paid.

More broadly speaking, options traders have been buying to open calls relative to puts at a faster-than-usual clip in recent months. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for instance, the security's 50-day call/put volume ratio of 0.88 ranks in the elevated 82nd annual percentile.

Echoing this call-skewed backdrop is XOM's Schaeffer's put/call volume ratio (SOIR) of 0.87. Not only does this indicate that calls outweigh puts among options expiring in three months or less, but it ranks lower than 78% of all similar readings taken in the past 12 months. Simply stated, short-term speculators are more call-heavy than usual toward the energy stock.

Now appears to be a prime time to purchase premium on XOM's near-term options, too. While the security's Schaeffer's Volatility Index (SVI) of 16% ranks in the 11th annual percentile, its 30-day at-the-money implied volatility of 15.8% is docked in the 18th percentile of its 12-month range. Summing it all up, the options market is pricing lower-than-usual volatility expectations on XOM's short-term options.

On the charts, XOM pulled back sharply after hitting an annual high of $95.55 on July 15. However, the stock formed a double bottom in the $82.50-$83.50 neighborhood in late September and late October/early November, which was home to XOM's 320-day moving average and a 50% Fibonacci retracement of its July highs and January lows. What's more, today's pop has the shares of Exxon Mobil Corporation (NYSE:XOM) trading comfortably north of previous resistance in the $88.50-$89.00 neighborhood, and above peak front-month call open interest at the December 90 strike.

xom daily since december 2015

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