Buy Alert: February 27, 2015
Buy Alert: February 27, 2015
Option Strategy:
Buy Exxon Mobil (XOM) March 20, 2015 $90.00 calls for $1.20 or better.
Commodity Outlook: Oil
The WTI April 2015 contract suffered a swift downturn yesterday thanks to a surging US Dollar. At one point, the commodity was down $2.96 a barrel from Wednesday’s close.
But then something interesting happened…
While crude still closed red on the day, a large bullish trader quickly pushed the commodity $1 higher from the intraday low of $47.80 by the close of trading.
The late day rally is a clear sign that dip buyers are out in force in the oil market.
Now let’s be clear…
Just because dip buyers are present, doesn’t mean crude can’t go any lower.
I’m merely pointing out the fact there are large speculators out there who feel oil has bottomed and are buying short-term dips in the commodity with gusto.
Whether they are right or not remains to be seen.
But there was another interesting trade from yesterday that really caught my eye…
Resource Company: Exxon Mobil (XOM)
Let’s cut to the chase, as you likely already know who XOM is.
What I really want to show you is the huge short-term bullish bet made on the company yesterday.
All told, 66,400 contracts of March 20, 2015 $92 calls were traded yesterday. That’s an enormous jump over the previous day’s open interest of 138.
But more importantly, one trader gobbled up around 50,000 of those $92 calls for around $0.40 a contract- a $2 million bullish bet.
That’s a huge out-of-the money call option bet that expires in just a few weeks! Clearly, someone with substantial resources believes XOM is about to jump higher- and soon.
Folks, this is something we can’t ignore. We’re piggybacking this trade with a call strike that’s just a little closer to current prices.
Here it is…
Buy the XOM March 20, 2015 $90.00 calls for $1.20 or better.
The current bid/ask spread for this contract is $1.08/$1.12.
Do not pay more than $1.20!
Our official entry price for performance tracking is $1.12. Your price may be higher or lower.
Exit Strategy:
Remember, we want XOM to trade higher. Our first profit target is $92 and our second is at $96.
The risk control price for this trade is $85.90. If XOM trades below that level, conservative investors should consider closing this trade to preserve capital.
Keep in mind, expiration is just around the corner for these calls so their time value will erode quickly. As a result, if you’re overly conservative you may want to decrease your position size, or hold off on this trade altogether.
Category: Commodity Trading
