Since suggesting this trade on June 2nd, stock broke support at 80 and almost touched its 200 day moving average at about 77. stock has since rallied back, but the move may be short lived if the feds got it right with their move to tap the strategic oil reserve last week and crude oil prices stay low….while this can have less pronounced effect on integrated names such as XOM, but technically the chart broke and in my opinion could retest last weeks low…..Since making a matched 52 week high in early May, the chart has made a series of lower highs and lower lows…..
This Put fly is now worth about .17 with the stock at 80.10 and can be sold for a small loss….depending on your market view and your view on the energy complex you may want to take this one off as the closer we get to July expiration the faster the July 77.50 puts will decay…I would probably look to pull the plug on this and look to roll to something longer dated if you maintain conviction on the short.
[caption id="attachment_2975" align="aligncenter" width="300" caption="1 Yr XOM chart Provided by Bloomberg LP"]
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ORIGINAL POST JUNE 2nd 2011:
XOM is one of the better performing stocks in the almost relevant Dow Jones Industrial Average, up almost 11% ytd. [private]
On a purely technical basis the chart looks very vulnerable to me as it approaches a key support level at 80, which also looks to be the neckline of a head and shoulders top…..If breached, you could have a fairly quick move back to 75 which is also the 200 day moving average……
[caption id="attachment_2348" align="aligncenter" width="300" caption="1 Yr XOM chart Provided by Bloomberg"]
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With the stock at $81, I want to look for a low premium way to isolate a move to the mid to highs 70s by July Expiration:
TRADE: XOM ($81) BUY the July 77.50 /75 / 72.50 Put Fly for .20
-Buy 1 July 77.5 Put for 1.00
-Sell 2 July 75 Puts at 1.20 (.60 each)
-Buy 1 July 72.5 Put for .20
Break-Even On July Expiration:
-btwn 77.50 and 77.30 lose up to .20
-btwn 77.30 and 75 make up to 2.30
-at 75 make 2.30 or 11x your money
-Btwn 75 and 72.50 you payout trails off
-75 or below lose .20