Unusual Options Activity In Exon Mobil

Saudi Aramco will debut as an IPO this coming Thursday at priced of $8.53, a share, valuing the company at $1.7 trillion. This is all part of Prince Mohammed’s Vision 2030 plan to modernize Saudia Arabi economy away from oil. This will be the biggest IPO in history and will make it the most valuable publicly traded company in the world ahead of Apple (AAPL), which is worth about $1.15 trillion.

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Oil prices also had their the biggest weekly gain since June after Saudi Arabia surprised the market with a supply cut beyond what was agreed to with fellow OPEC+ members. Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman said the country would continue its voluntary cut of 400,000 barrels a day.

Just the other day I wrote about how the Smart Money, in particular Sam Zell, Steven Cohen, Ken Griffin and Ray Dalio, all billionaires are buying distressed oil assets in the US.

Sam Zell is now buying distressed assets as the U.S. oil sector sees a slowdown. He’s bought assets in California, Colorado and Texas from companies that are raising cash to stablize their shrinking cash reserves.

Steve’s hedge fund is also buying into the oil sector. One such company is Pioneer Natural Resources. Pioneer Natural Resources Company operates as an independent oil and gas exploration and production company and operates in the Permian Basin of West Texas, one of the world’s largest oilfield

Ken Griffin is the founder and CEO of Citadel, made 9-digit purchases in three particularly interesting stocks, one of which was Baker Hughes Company. Baker Hughes Company provides integrated oilfield products, services, and digital solutions worldwide.

Recently Ray’s hedge fund bought an additional 1,177,026 shares to the fund, increasing his stake to over 2.5 million shares of EQT Corporation, which operates as a natural gas production company in the United States.

Exxon Mobil Corporation explores for and produces crude oil and natural gas in the United States, Canada/Other Americas, Europe, Africa, Asia, and Australia/Oceania. While the S&P 500 is up 25% YTD, Exxon Mobil is up only 2%. Part of the issue is oil prices are depressed, oil shale players are barely making money and the US-China trade war has put a damper on economic growth around the world. But according to the IEA estimates, oil demand will continue rising sharply for at least another five years and then plateau around 2030. And according to Bank of America, they have selected Exxon Mobil as its top U.S. oil major pick for 2020, saying the shares could gain 50% as production continues ramping up and growth accelerates.

On Friday morning, Benzinga Pro subscribers received two option alerts related to unusually large Exxon Mobil trades.
At 9:31 a.m., a trader sold 1,000 Exxon put options with a $70 strike price expiring on Jan. 17 at the bid price of $1.71. The trade represented a $173,000 bullish bet.

At 9:41 a.m., a trader bought 1,150 Exxon call options with a $60 strike price expiring in January 2022 near the ask price at $11.95. The trade represented an $1.37 million bullish bet.

Many of these large options traders are wealthy individuals or institutions who may have unique information or theses related to the underlying stock.

Unfortunately, stock traders often use the options market to hedge against their larger stock positions, and there’s no surefire way to determine if an options trade is a standalone position or a hedge. In this case, given the relatively large size of the call purchase on Friday, it could certainly be an institutional hedge.

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However, based on everything that’s going on in the world and the recent bullish buying by the Smart Money, I don’t think this is a hedge. And the charts are telling me just below price there is a major support/resistance band at $68. However, only time will tell, so stay tuned.

This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.