Taking profits on XOM & OXY to pay for gas
Gas prices peaked at $4.50/gallon in my neighborhood last week. The release of barrels from reserves is providing a little reprieve, but prices are still high enough to avoid unnecessary road trips.
Exxon having its best quarter in seven years
XOM saw oil and gas profits of $9.3 billion last quarter. This marks its highest quarterly profit since at least 2014, prompting US and EU lawmakers to talk about taxing dividends and windfalls. This is in lockstep with oil prices also reaching their highest in seven years due to Russia’s invasion of Ukraine. As Exxon does not hedge oil sales, their profits generally match changes in energy prices. But Exxon’s plan to phase out Russian operations could lose the company $4 billion and 1-2% in production.
XOM shares have followed suit, jumping 36% year to date to $83.16 as of Monday. Other energy firms’ are expected to post similar earnings.
OXY leads the pack
Occidental Petroleum made the news thanks to Warren Buffett’s snapping up a 14.6% stake and its own CEO, Vicki Hollub, adding to her own position, indicating confidence in its stock price. According to Yahoo Finance and Zacks, underneath the company’s surface is a year-over-year cash flow growth of 142.1%, much higher than many of its peers, where the industry average is closer to -3.9%. In Q1, OXY led the S&P as its top performer even as the overall market closed its first losing quarter in two years.
My play Taking in the news, but ignoring the hype, doing my own research, and finding myself with Buffett on this one. Here’s my defined outcome strategy, a call spread funded by a cash secured put. $OXY Buy: 1 $57.5 call, Sell: 1 $70 call, Sell: 1 $50 put, Exp: 11/18/22
Profit as long as OXY stays above $49.11, which I’m betting it will and can make up to 27.8% (48.0% annualized)
Submitted April 05, 2022 at 05:03PM by OliveInvestor
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