Exxon Mobil Corporation (NYSE: XOM) has been one of many worst-performing giant shares in your entire S&P 500 in over the previous decade, and is off to a horrendous begin to 2020 because of COVID-19.
WTI crude oil costs plummeted greater than 100% to destructive $Three per barrel on the time of writing on Monday, and at the very least one giant choice dealer is betting the worst is but to return for Exxon.
On Monday, Benzinga Pro subscribers obtained three choice alerts associated to an unusually giant Exxon Mobil commerce:
- At 9:32 a.m. a dealer bought 518 Exxon Mobil put choices with a $30 strike worth expiring on Might Eight close to the bid worth at 40.1 cents. The commerce represented a bullish guess price $20,771.
- At 12:02 p.m. a dealer purchased 2,500 Exxon Mobil put choices with a $42.50 strike worth expiring on Jan. 15, 2021 on the ask worth of $7.35. The commerce represented a bearish guess price greater than $1.83 million.
- At 1:04 p.m. a dealer bought 661 Exxon name choices with a $44 strike worth expiring on Friday on the bid worth of 47 cents. The commerce represented a bearish guess price $31,067.
Why It is Essential
Even merchants who stick completely to shares usually monitor choice market exercise intently for unusually giant trades. Given the relative complexity of the choices market, giant choices merchants are sometimes thought of to be extra subtle than the typical inventory dealer.
Many of those giant choices merchants are rich people or establishments who might have distinctive data or theses associated to the underlying inventory.
Sadly, inventory merchants usually use the choices market to hedge in opposition to their bigger inventory positions, and there’s no surefire method to decide if an choices commerce is a standalone place or a hedge. On this case, given the comparatively giant measurement of the biggest Exxon commerce, it may symbolize an institutional hedge.
Exxon’s Tough Outlook
WTI crude oil costs crashed to their lowest ranges in historical past on Monday, dropping underneath $5 per barrel on issues the U.S. is operating out of storage. Oil costs have plummeted as demand has fully dried up as a consequence of journey restrictions and stay-at-home orders associated to COVID-19.
The unfold between entrance month and second month oil futures contracts expanded to its widest stage in historical past, and Might WTI futures contracts even briefly dipped into destructive territory for the primary time in historical past.
Earlier this yr, analysts at Redburn estimated Exxon Mobil wants crude oil costs of round $74/bbl to cowl prices.
Regardless of the historic weak spot within the oil market on Monday, Bank of America analyst Doug Leggate raised his worth goal for Exxon Mobil from $62 to $70 and reiterated it as a high inventory choose for yield traders.
“Whereas the gamers have modified, we proceed to see the 1998 oil disaster because the playbook to advocate layering publicity throughout the vitality sector,” Leggate stated in a Monday notice.
Monday’s sell-off pushed Exxon’s dividend yield to eight.3%. Earlier this month Exxon Mobil introduced a 30% reduce to its 2020 capex, prioritizing its dividend yield and stability sheet within the near-term.
Bullish sentiment amongst StockTwits messages mentioning Exxon was at 62.3% on Monday, down from its 2020 excessive of 91.8% on Jan. 15.