Exxon Mobil $XOM Put Buyer Bets Big…

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Commodity Trading Research
Exxon Mobil XOM Put Buyer Bets Big
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• Hi, My name is Justin and Im with Commodity
  Trading Research, today were reviewing our
  recently published article

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• Exxon Mobil XOM Put Buyer Bets Big

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• Something remarkable happened in the options
  market yesterday
• A well-heeled investor bet 54.3 million on
  additional downside in Exxon Mobil XOM via
  October 16, 2015 85 strike puts.

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• Thats a huge bearish bet on the worlds largest
  oil company.
• Let me explain

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• As you may know, XOM stock has been suffering in
  2015 along with nearly every other oil producer.
  Shares of the oil producer are down 13.6
  year-to-date and 19.6 lower over the past year.
• Heres a chart

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(No Transcript)
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• As you can see, XOM is stuck in a steep
  downtrend. And while its certainly not great
  performance, shares of the crude producer have
  held up rather well relative to others stocks in
  the oil industry.

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• But now someones betting big that XOM has more
  room to fall

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• By purchasing 60,000 contracts of the 85 strike
  puts, which were trading for 9.05 at the time of
  purchase (905 x 60,000 54.3 million), this
  traderclearly has a bearish perspective on XOM.

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• But whats most interesting (besides the fact
  this bet was made in the first place) is the
  trader chose deep-in-the-money (DITM) puts.

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• Remember, DITM puts and calls are not only much
  higher priced than their at-the-money and
  out-of-the-money counterparts, but they also have
  a much higher delta reading.

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• In fact, the XOM October 85 puts currently have
  a delta of 0.91.
• What does that mean ?

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• For every 1 downturn in XOM stock, these put
  options will gain value by 0.91.
• Clearly, this trader stands to make a fortune if
  XOM keeps trending lower!

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• Of course, theres always the possibility our
  investor is hedging a long XOM stock position
  with this put trade. If Exxon shares are ready
  to drop, buying puts is a great way to reduce
  long stock exposure in the downfall.

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• However, its unusual for a hedger to buy DITM
  option contracts.
• Thats why I think this trade is simply a big
  bearish bet on additional downside in XOM.

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• What does all this information mean for oil
  industry stocks?

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• There are a number of important insights we can
  glean from this 54.3 million put bet on XOM.
• First of all, this well-heeled trader is
  convinced oil is not ready to bounce back to
  higher ground.

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• West Texas Intermediate (WTI) is currently
  carving out new yearly lows under 42.50 a
  barrel. Given this big bet, theres a growing
  chance the commodity drops into the high 30 a
  barrel range soon.

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• Secondly, since this trader is essentially
  shorting one of the strongest players in the
  entire oil industry, theres a very good chance
  oil stocks as a whole keep dropping to new
  52-week lows.

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• As you may remember, I recently wrote an article
  suggesting a potential bottom in oil exploration
  stocks. This big bearish bet in XOM clearly
  counters that analysis.

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• Bottom line
• Yesterdays hugely bearish bet in XOM suggests
  oil and oil industry stocks have yet to reach a
  bottom.

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