October 10, 2018

Can Exxon Mobil Hold Its Ground In This Market?

Intensifying into an extremely dangerous Category 4 hurricane, Michael is expected to strengthen further before making landfall in the Florida Panhandle or Big Bend area around noon today. Oil producers – including Anadarko (NYSE: APC), BHP Billiton (NYSE: BHP), BP (NYSE: BP) and Chevron (NYSE: CVX) – have evacuated many personnel, with nearly 40% of daily crude oil production shut in the Gulf. On watch are also insurers, power providers, hospitals, livestock and crop producers, generator manufacturers and building stocks.

*Source:  Seeking Alpha

Let’s consider Exxon Mobil Corporation (Ticker: XOM):

 

The VantagePoint platform recently indicated continuing upside momentum.

Using the predictive indicators embedded within the VantagePoint platform and its predictive AI technology, we will point out three significant things. We have a bullish crossover indicated by the blue predictive indicator line crossing above the black simple moving average October 8th.  We can combine that with the VantagePoint propriety neural index indicator moving from the RED to the GREEN on that same day.  This indicator measures strength and weakness for a 48-hour period, in this case, strength.  The move to the GREEN position further makes the case for a potential bullish scenario. We also have the predicted high and low above yesterday’s actual high and low indicating further strength.  I want to play the VP bullish indication.

Strategy Discussion

For active traders with a shorter investment time horizon, you can consider a setup utilizing options. Given the market conditions outlined above, taking an active, premium debit approach may be the best path to success.

Because of the reasons given above, the purchase of a debit call spread may be one way to approach this situation.  You will first want to calculate your target strike.  In order to do this, you will need three pieces of data:  current price, expiration date and the implied volatility associated with that expiration date.  For XOM, that yields a targeted strike of ~$90.00.  You may want to consider the XOM November 2nd weekly expiration 87.5/89 call spread, buying it for $0.45.  The most you can lose is the premium paid and the most you can gain is the width of the wider spread less any premium paid.  Max risk = $0.45 and max reward = $1.15

This means that you are getting odds of 2.56:1.

Given the trading and market environment outlined above, a trader must evaluate whether this reward/risk ratio is appropriate for his/her risk tolerance.

If you would like to learn more about the VantagePoint platform and take advantage of the exclusive offer that our clients enjoy, please visit:

https://discover.vantagepointsoftware.com/prosper-demo/

about the author:

Mike Shorr

Since 1994, Michael has been an on-the-floor market maker, Vice-President of Interest Rate Derivatives for Knight Financial Products and Director of Education and Options Instructor at Trading Advantage. He makes the oftentimes complex world of options and trading accessible to the novice and advanced trader alike. Michael has a Bachelor of Science degree in Statistics and Finance from the University of Illinois Champaign-Urbana. He presently is Director, Trader Education at ProsperTradingAcademy.

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