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Exxon Mobil Director Pockets $120 Million. Now It’s Your Turn! (XOM)

Posted on February 7, 2022

We’re getting preliminary signals that the nose-dive in markets is reaching a climax.

Again, these are just preliminary signals, but they indicate that selling momentum is beginning to reach its limit.

That does not mean the downside move is complete; far from it.

Indeed, the final selling spasm could pull markets lower by another fifteen or twenty percent.

What it does indicate, however, is that from a timing perspective, we’re approaching the end-phase of the decline, and that sentiment, technicals and money flows are all aligned in that regard.

The time for switching our bearings is approaching.

We’ll keep you posted.

The Political Angle

As anyone reading the political tea-leaves can tell you, the Joe Biden Democrats have absolutely nothing going for them heading into this fall’s electoral campaign.

And it’s precisely for that reason they need a miracle.

Now, we’d never accuse anyone of deliberately goosing markets for political ends, but we do know that it’s happened – in other jurisdictions, of course – and that there’s little more conducive to the reelection of incumbents than a face-rip, bull market on Wall Street.

So if anyone suggests that going into November’s polling we’ll be looking at new highs on the indices and – hey! lookie, lookie: Biden polling above 50%! – remember, that that’s just life in the birthplace of modern Democracy, the glorious red, white and blue land of the deep-state free.

Where it’s not only possible for an elite few to conspire against a population of 300 million zombie serfs – but also to pull it off!

Earnings Season

We’re now entering the meat and potatoes period of earnings season, in which the most widely traded and biggest S&P 500 companies will report.  Until now, beats have been fewer and the size of those beats smaller than they’ve been for a year.  Q1 guidance, too, has been poorer than we’ve seen in a while.

Those in favor of a Democrat surprise in November will therefore have to push a Q2/Q3 recovery story in order to spin the market higher and get more impressive polling numbers for the Prez.

We’ll continue to monitor the data.

May the truth be revealed.

Today’s Trade

We’re tackling the cereal killers at Exxon Mobil (NYSE:XOM) today, after inspiration reached us from long-time reader Joel E., may G-d bless him and all that is his, who urged us another look at the energy sector.

The trade offers a gusher 4067% payout on an investment of just six cents!

And why Exxon?

Truth is, we deliberated a while before stepping up.

It seems that the wedgie that was applied to the oil complex over the last 30 days has now hoisted her to the top of the flagpole.

Yet few have wafted so breezily aloft as our friends from Irving, Texas.

And that, despite the following fundamentals –

  • XOM’s P/E is 15.10,
  • Annual Yield is a rich 4.32%, and
  • P/B is 2.17.  And yet energy companies are not valuated like industrials.
  • Price to Free Cash Flow is a far more meaningful comparative metric, and XOM’s is far too high at a ridiculous 914.17.  Moreover…
  • EPS for the year were DOWN 265.10%,
  • EPS for the last five years were DOWN 5.70%, and
  • EPS for next year are expected to DECLINE by 5.42%, according to consensus estimates.

So why the hype…?

  • Try asking insiders, who sold 27.04% of their holdings in just the last 60 days – including board member Jeffrey Ubben, who pocketed $120 million just last week, when he dumped 90% of his stake.  Jeffrey was named an XOM director last March.  Not bad for a year’s work, hunh?

Now have a look at the chart –

Technically,

  1. RSI is overbought and MACD is stretched and losing momentum (in green), both signals indicative of a top.
  2. Volumes ratcheted higher as prices exploded to new highs (in black), indicating a potential distributive event (that Mr. Ubben, a former fund manager at Fidelity, also partook in).
  3. The actual 42% price rise of the last six weeks (that added $100 billion in market cap) left several gaps in its wake (in blue) – that we believe have to be filled before the decline is complete.
  4. Those gaps align with a simple Fibonacci calculation that sees the stock retracing to $66 (in purple), precisely where the first of the aforementioned gaps resides.

And yet the trade we’ve crafted requires only a modest decline to achieve its full 4067% potential!

Have a look –

A Jew and His Money recommends you consider selling the XOM April 14th 80/82.50 CALL spread for $1.10 (4.50/3.40) and buying the XOM April 14th 80/77.50 PUT spread for $1.16 (4.00/2.84).  Total debit on the trade is $0.06.

[*Sell the 80 CALL and buy the 82.50 CALL.  **Buy the 80 PUT and sell the 77.50 PUT.]

Rationale: we pay six cents to make a possible $2.44.  That’s a tremendous max profit of 4067%.

Our max loss is a modest $2.56 (difference between the CALL strikes plus the initial debit).

Our breakeven arrives at $79.94, just 1.8% below the current share price.

Full profits are achieved with a mere decline of 4.8%.  And that, as they say in Birmingham, is a pittance.

For those who can swing a bigger line (and like the trade), there’s always the option of taking on multiple units.

May your winnings come with a bracha.  And may your life always move toward kedusha.

And may the Heavenly One ever make His countenance shine upon you.

With kind regards,

Hugh L. O’Haynew

 

4 responses to “Exxon Mobil Director Pockets $120 Million. Now It’s Your Turn! (XOM)”

  1. Jack Peterson says:

    XOM pays a dividend in a couple of days, I see all these option trades in the confirmation screens are “subject yo dividend risk”. How does that work?

  2. Jack Peterson says:

    Looks like that dividend thing works like this:

    EXXON MOBIL CORPORATION COM XOM

    If you are assigned early on your short call position, this could create a short stock position in your account before the ex-dividend date. If you have a short stock position in a security paying a dividend, you would be required to pay the dividend amount for each share.

    To learn more about early assignments and dividend risk, please refer to the article in The Ticker Tape.
    https://tickertape.tdameritrade.com/trading/2017/05/analyzing-dividend-risk-61479

  3. Jack Peterson says:

    After talking to the margin desk I was advised that if the intrinsic value of the short call is greater than the value of the dividend , in this case 3.70 on the short call and .88 for the dividend there is no concern for it getting assigned. Good to know for the future.

  4. Hugh L. O'Haynew says:

    bs’d
    Brother Jack!
    Before we had time to turn around on your question, you gave us the full tutorial!
    G-d bless you for your diligence and your speed.
    You make us all better.
    (Even if we feel a little silly for our tardiness). 😜
    All the best,
    Huey

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