Surge in September put buying.
On Wednesday, over 5,000 contracts traded on the September 2019 $69.50 put options on
ExxonMobil (XOM). With a prior open interest of 260, this was a 19-fold surge in volume.
With a current share price at $70, the options are just out-of-the-money. The option buyer could see a penny-for-penny move should the shares fall less than 1 percent from here.
ExxonMobil shares have traded as low as $64.50 in the past year, so a drop to those lows within the next month could make the option worth as much as $5, about a 270 percent gain from its current price around $1.35 (or $135 per contract).
However, that would require a considerable drop, even beyond the drops in oil prices that have occurred lately on trade war fears. Such drops in the oil market are common, but usually take place later in the year, not in September.
Action to take: At current prices, and with a dividend yield just at 5 percent, shares of ExxonMobil would be a good buy for the long haul here.
Anyone interested in building a position could consider selling the September $69.50 puts instead of buying them. If shares are higher than $69.50 in the next month, they’ll make about $135, or gas money. If shares are under, they’ll be assigned shares at $69.50 but also with $135 on the trade already.