Option Trade: As Oil Stocks Outperform, Consider This Bullish Trade In Exxon Mobil

TL;DR

Learn how to set up a bull put spread in Exxon Mobil for short-term trading, taking advantage of the stock's upward trajectory and strong performance in the oil sector.

Transcript

[Applause] hey option traders today we're looking at setting up a bull put spread in exxon mobil the nasdaq and s p 500 put in another strong reversal yesterday but oil stocks continue to outperform exxon exxonmobil broke out above resistance on january 4th and has continued on an upward trajectory since then the company is ranked number three in i... Read More

Key Insights

• 🛀 Exxon Mobil's stock has shown strength and outperformance in the oil sector since January 4th.
• 👻 The suggested bull put spread strategy allows traders to take advantage of the stock's upward trajectory.
• ✳️ The maximum risk and potential return on the suggested put spread trade provide a favorable risk-reward ratio.
• 🙃 The delta of the put spread indicates exposure similar to owning 18 shares of Exxon Mobil.
• ✳️ Earnings risk is not a concern for this trade, as earnings are due in early February.

Questions & Answers

Q: What is a bull put spread and how does it work?

A bull put spread strategy involves selling a put option with a higher strike price and simultaneously buying a put option with a lower strike price. This allows traders to profit if the stock remains above the higher strike price by expiration, while limiting potential losses.

Q: Why is Exxon Mobil considered a strong stock in the oil sector?

Exxon Mobil has been performing well and outperforming in the oil sector since its breakout above resistance on January 4th. It is ranked number three in its group, has a composite rating of 97, and a relative strength rating of 92.

Q: What is the maximum risk and potential return on the suggested put spread trade?

The suggested put spread trade in Exxon Mobil has a maximum risk of $159 and a potential return on risk of 26%.

Q: What is the break-even point for the put spread trade?

The break-even point for the put spread trade is calculated as 69.59, which is the difference between the higher strike price (70) and the option premium (41 cents).

Summary & Key Takeaways

• Exxon Mobil's stock has been on an upward trajectory since breaking out above resistance on January 4th and continues to outperform in the oil sector.

• A bull put spread strategy can be employed by selling an out-of-the-money put option and buying a further out-of-the-money put option.

• The specific trade suggested involves selling the 70 strike put option and buying the 68 strike put option, with a maximum risk of $159 and a potential return on risk of 26%.