December 8, 2022
Sell Existing Position: Sell your Occidental Petroleum (OXY) December 65 Call for $1 or more
OXY looked like a star as money rotated into oil stocks earlier this year. We took advantage of that strength to lock in profits of 29% on a third of our position, and then 65% on the next third. However, like sooo many stocks this year, money then rotated out of oil stocks/OXY, which hurt the final third of our position.
Because of this weakness, and with so little time until expiration next Friday, it is now time to take a loss on the final third of our position.
To execute this trade you need to:
Sell to Close your OXY December 65 Call
This sale today may prove to be a mistake if oil stocks get back in gear in the next seven trading days. That being said, I’ve seen no signs of that happening, so I am going to sell my position today.
August 2, 2022
Roll Position: Sell your OXY September 60 Calls, and buy the December 65 Calls.
Occidental Petroleum (OXY) will report earnings today after the close. Headed into the event, we are holding a third of a position, having taken profits twice. While I think the stock looks solid, and option activity remains bullish, because time is becoming an issue I am going to roll this trade to the December expiration cycle.
Please note, I am not putting fresh capital to work in this trade. For example, if I owned 10 September calls, today I would sell those calls, and then buy 8 December calls (approximately).
To execute this trade you need to:
Sell to Close your OXY September 60 Calls
Buy to Open the OXY December 65 Calls
Here are the earnings previews of OXY and SBUX, both of which will report today after the close:
OXY - With the stock trading at 64.5, the options market is pricing in a move of $5 this week, or 59.5 to the downside and 69.5 to the upside.
Open interest is skewed bullish on a ratio of 1.3:1 call vs. put.
Skew is pricing in typical downside fear and upside interest.
SBUX - With the stock trading at 84.5, the options market is pricing in a move of $4.50 this week, or 80 to the downside and 89 to the upside.
Open interest is skewed bullish on a ratio of 1.9:1 call vs. put.
Skew is pricing in typical downside fear and upside interest.
May 27, 2022
Sell a Third of Existing Position: Sell a Third of your OXY September 60 Calls for $13.85 or more.
As I wrote yesterday, I’m becoming more encouraged by the market action. However, I’m not so confident that the market will continue to strengthen that I am going to break our trading rules, as we are likely still in a “stick and move” trading environment. This brings me to OXY …
Our OXY position is now at a potential profit of approximately 60%, and today I am going to sell another piece of our position, and then will let the balance of the traderun for much greater profits.
To execute this trade you need to:
Sell to Close a Third of your OXY September 60 Calls
Please note, with the final piece of our position I am going to let this trade really run, looking for a grand slam in the months to come.
May 5, 2022
Sell a Third of your OXY September 60 Calls for $10.30 or more.
OXY continues to look rock solid, as the stock is approaching a new high today. And while I think the stock looks terrific, and option order flow is without question bullish, commodity-related stocks can go from red hot to ice cold very quickly. For that reason, I am going to stick with the system and sell a third of our position today for a profit of approximately 20%.
To execute this trade you need to:
Sell to Close a Third of your OXY September 60 Calls
As is always the case when we sell a portion of our position, we hope this initial sale is a big mistake, and the stock and our position trade much higher.
March 24, 2022
Buy the Occidental Petroleum (OXY) September 60 Calls (exp. 9/16) for $9.75 or less.
The Cabot Options Trader/Pro portfolios have had a nice run trading commodity-related stocks this year. FCX was closed for a profit of over 100% last week, and CFhas reached levels I never could have imagined.
However, with the sale of FCX, and partial sales of CF, our exposure to the commodity group has been lowered in the last couple of weeks.
This brings me to Occidental Petroleum (OXY), which has been on a big run of late along with its oil stock peers and is a recent buy of Warren Buffett. As has been reported by several news outlets, Berkshire Hathaway purchased 18.1 million shares of OXY for almost $1 billion last week, and in total Berkshire owns 136.4 million shares, valued at $7.2 billion. Berkshire also holds warrants to buy another 85 million shares at an exercise price of $60.
The Buffett/Berkshire component is without question interesting.
However, even more intriguing to me is the steady flow of bullish option activity in the stock, including these trades made recently:
Yesterday – Buyer of 10,000 May 65 Calls for $4.25 – Stock at 60.25March 21 – Buyer of 3,500 April 62/75 Bull Call Spreads for $3 – Stock at 61.5March 21 – Buyer of 2,500 September 65 Calls for $8.10 – Stock at 61March 17 - Buyer of 2,000 April 57.5 and 60 Calls – Stock at 56March 17 - Buyer of 4,000 June 70 Calls for $3 – Stock at 57.5
While there is risk in buying OXY at these levels (more on that below), I want to again add commodity exposure to the portfolio via a strong stock, with overwhelming bullish option activity.
To execute this trade you need to:
Buy to Open the OXY September 60 Calls
The most you can lose on this trade is the premium paid, or $975 per call purchased.
Please note, I labeled this trade as “risky” for the following reasons:
First, we are chasing a stock that is already up 106% year-to-date, so there is risk in buying the top.
Second, should the Ukraine/Russia situation get resolved, oil, and oil stocks, could quickly fall. And for all we know, this could happen before the end of the day. It’s essentially a total unknown.
That being said, even if the price of oil were to decline by 10% or more, I think these oil stocks will only pull in temporarily.
Also, should the war in the Ukraine end, which may hurt OXY, this would likely be a positive development for the balance of our portfolio.
Finally, given the steady flow of bullish option activity, and the seemingly non-stop bid for oil and commodity stocks, I like the risk/reward in this call buy.
Of note, late last week Barclays raised the firm’s price target on Occidental Petroleum to 69 from 44 and kept an Overweight rating on the shares.
| Position (Original) | OXY September 60 Calls |
| Position Strategy | Buy Call |
| Opened Date | March 24, 2022 |
| Expiration | September 16, 2022 |
| Net Price | 8.75 |
| Strike | 60 |