Unusual Options Activity: ExxonMobil (XOM)

Shares of energy giant ExxonMobil (XOM) have been on a tear this year, with an 85 percent rally. One trader sees a pullback in the months ahead.

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  • That’s based on the February 2023 $80 puts. With 77 days until expiration, 4,511 contracts traded compared to a prior open interest of 183, for a 25-fold rise in volume on the trade. The buyer of the puts paid $0.44 to make the downside bet.

    The stock last traded for just under $112, so shares would need to fall about $32, or nearly 30 percent from current levels for the trade to move in-the-money.

    A move back to the $80 range would unwind the stock’s most recent rally that started in late September.

    Any energy stock will move in the short-term based on oil prices. With rising oil and gas inventories, as well as a concern over a slowing economy, a move downward in the months ahead is possible. However, oil prices could also rise, depending on whether or not OPEC+ cuts production.

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  • Action to take: Overall, shares have rallied strong, and the stock is near a 52-week high, even as oil prices are well off their highs for the year. That suggests a pullback is more likely. Patient investors interested in the stock should look for a better buying point, say under $90 per share.

    For traders, the put seems well priced for a big move. While that may not occur, if it does, the February $80 puts could deliver triple-digit returns. At the very least, they can serve as an inexpensive hedge right now.

     

    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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