Blue-Chip Energy Stock for Options Bulls

A round of upgrades could still boost CVX

Jan 3, 2023 at 11:03 AM
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Shares of energy firm Chevron Corporation (NYSE:CVX) are bull flagging on the charts, after a short-term downtrend channel breakout. The equity's +50% year-to-date level has been acting as support, as it slopes higher and holds above its 20-day moving average. With this solid technical foundation in place, we're initiating a new long position on CVX.
 
There are a few concerns to be on the lookout for, including potential resistance at the $184 through $186 range. A break below the aforementioned trendline could also potentially pressure the stock's price action, as it has typically followed the moving average during bull runs. Further, a break below $174 could potentially send the shares to the 80-day moving average, at the very least.
However, an unwinding of pessimism amongst the brokerage bunch could certainly give the shares a boost. Currently, 16 of 30 covering Chevron stock recommend a "buy" or better rating, which leaves room for analyst upgrades.

Similarly, options traders have been more bearish than usual, and an unwinding of this pessimism could add tailwinds. Data at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows CVX sports a 50-day put/call volume ratio that stands higher than 99% of annual readings.

Those looking to speculate with options can do so for a bargain right now. Chevron stock's Schaeffer's Volatility Index (SVI) of 28% stands in the relatively low 25th percentile of readings from the past 12 months, meaning options traders are pricing in low volatility expectations at the moment. Our recommended call option has a leverage ratio of 7.58, and will double on a 12.6% rise in the underlying shares.

 

Subscribers to Schaeffer's Weekend Trader options recommendation service received this CVX 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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