Oil and gas giant Exxon Mobil (XOM) has seen its shares slide 13 percent over the past year, as energy prices have traded in a range. One trader sees shares trending lower through the middle of next year.
That’s based on the June 2025 $125 puts. With 492 days until expiration, 5,204 contracts traded compared to a prior open interest of 113, for a 46-fold rise in volume on the trade. The buyer of the puts paid $24.20 to make the bearish bet.
Exxon shares recently traded at $103, meaning the $125 puts are about $22 in-the-money, leaving about $2.20 in time premium. The strike price is also higher than Exxon’s 52-week high of $120.70.
As with many energy companies, Exxon slowed down last year after a stronger 2021 and 2022. Earnings are off by 40 percent, and revenues are down by 13 percent.
Action to take: Shares will likely remain volatile based on energy price sin the next year and change.
For now, shares appear to be range-bound. Long-term investors may like shares here, especially with the stock paying a growing dividend with a 3.7 percent starting yield now.
For traders, the long-dated puts may play out well in the months ahead on a downtrend in shares. But when oil prices tend to spike, it’s to the upside.
So traders may want to look to take quick mid-double-digit profits from this position.
Disclosure: The author of this article has a position in the company mentioned here, and may further trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.