Exxon Mobil (NYSE: XOM) Stock Chart – Options Trading
The energy sector has been struggling in recent months as the price of crude oil has fallen on the back of falling global demand.
Exxon Mobil (XOM) is the leading player in the oil industry and is the 13th largest stock in the United States by market capitalization.
The stock is currently 8% below the high set in late April and has just crossed back above its 20-day moving average. This could provide bullish investors with a nice entry point provided the stock holds above that crucial moving average.
XOM also just completed a bullish MACD cross.
One trading opportunity for those traders with a bullish bias is a Bull Put Spread using the $70 strike as the short put and the $65 strike as the long put.
As of June 18th, this trade offered a 11.61% return on risk over the next 59 calendar days when using the August 16th expiry.
With the 20-day moving average currently around $73.91, this trade represents a good risk / reward for those betting that XOM will stay above this line in the sand.
Join me for a webinar on Saturday, where I’ll be sharing my market analysis and also looking at more trade ideas such as this.
The recent low at $70.63 could also provide support if the stock was tor resume its downtrend.
The maximum profit on the trade would be $58 per contract with a maximum risk of $442. The spread would achieve the maximum 11.61% profit if XOM closes above $70 on August 16th in which case the entire spread would expire worthless allowing the premium seller to keep the $52 option premium.
The maximum loss would occur if XOM closes below $65 on August 16th which would see the premium seller lose $442 on the trade.
The breakeven point for the Bull Put Spread is $69.42 which is calculated as $70 less the $0.58 option premium per contract.
Looking at the chart (featured above), if the stock breaks below the 20-day moving average in the next few days, this would be a good place to take losses and close the trade.
Otherwise, 20 percent of capital at risk is a good stop loss for bear call spreads. All traders should use stop losses to manage risk.
Implied volatility is currently quite high at around 20% which makes selling option premium attractive.
Just a reminder that you can join me for a webinar on Saturday, where I’ll be sharing my market analysis and also looking at more trade ideas such as this.
As always, do your own due diligence and trade safe!
The author does not have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.