Time to Bet on This Energy Stock's Pullback

There is plenty of room for downgrades amongst the brokerage bunch, too

Nov 9, 2021 at 3:34 PM
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The shares of Exxon Mobil Corp (NYSE:XOM) are running into resistance at the 1,000-day moving average, which has been in place since 2016, while approaching the equity's 2015 and 2019 lows. Plus, talks of U.S. President Joe Biden releasing oil from the Strategic Petroleum Reserve (SPR) could hurt prices, while the adoption of electric vehicles (EV) may depress demand. In other words, now could be the perfect opportunity to bet on a move lower for XOM.

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Meanwhile, the buy-to-open call/put ratio is above 3.0, indicating that calls have been bought to open at three times the rate of puts over the past 50 days. The 10-day ratio is 2.85, so calls have been almost three times more popular as puts bought to open over the past 10 days. What’s more, XOM’s front-month gamma-weighted Schaeffer's put/call open interest ratio (SOIR) sits at 0.37, illustrating a clear preference for calls right now.
 
Options look like a solid choice for those wanting to bet on XOM’s next move. The equity's Schaeffer's Volatility Index (SVI) of 24% sits higher than 6% of readings from the past 12 months. Plus, the security's Schaeffer's Volatility Scorecard (SVS) rating sits at 97 out of 100, suggesting Exxon Mobil stock has exceeded these volatility expectations during the past year -- a boon for premium buyers.

Our recommended put has a leverage ratio of -5.3, and will double in value on a 16.1% drop in the underlying equity.

Subscribers to Schaeffer's Weekend Trader options recommendation service received this XOM commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.

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