Exxon Stock has been in my portfolio since 2010. Exxon Stock symbol is XOM. The returns over the past 2 and a half years have been excellent and I have not yet been assigned shares in Exxon Stock. Last year I bought shares 4 times for a quick bounce and a trade out but put selling was the dominant strategy as each month I kept put selling for substantial gains.
Analysts and Media and How They Can Help
Like most people I get to hear and read analysts and media comments and opinions. While I don’t hold much credit in what they have to say, they can be incredibly helpful in reminding me about Put Selling opportunities. For example, last week they droned on about Exxon Stock and the horrible “numbers” as they attempted to pick through the earnings on April 24. I caught a few comments from the media about how Exxon Stock was “going to collapse” and how it had “fallen far” from its 52 week high. But media personalities and most analysts never look at the technical aspects you see in the charts below let alone read the entire financial reports. They do not study chart patterns or even stocks themselves and rarely do they understand the full financial reports after all they are not accountants. Instead most of the time they are simply repeating what has come across “the wire” or what others are also saying. For one thing there are thousands of stocks to mention and there is no need for them to understand the stocks they are discussing because they are simply trying to fill up air-time and websites with their daily blurbs. But this can be highly beneficial for investors such as myself.
The Media Can Be Incredibly Beneficial
When analysts and the media talk down one of my stocks it can be beneficial for my Put Selling and trading. For one thing it reminds me when one of the stocks I follow is in a downturn. As well believe it or not, it also pushes investors to get out of a position. Investors are a jittery bunch and any whiff of a problem and they bail. This also creates opportunities, so while I understand that analysts and media personalities are just doing their job, I also realize that “their job” can be quite beneficial for my Put Selling trades.
Put Selling Exxon Stock on the Earnings
For example, this past first quarter Exxon Mobil quarterly financials did not delight shareholders. Media personalities immediately talked down Exxon Stock. Earnings per share was up 6% to $2.12. But capital and exploration expenditures were up a whopping 33% from the same quarter in 2012 to $11.8 billion and oil-equivalent production fell by 3.5% from the same quarter in 2012.
There was even more that shareholders and analysts did not like. Upstream earnings were down $765 million to $7.03 billion. Operating expenses were higher by $250 million, liquids production was down and natural gas production was down 823 million cubic feet per day.
Some of the bright spots though were missed such as chemical earnings were up by $436 million this quarter over the same quarter in 2012 and Exxon Mobil repurchased 63 million shares of its own stock at a cost of $5.6 billion. With a company the size of Exxon Mobil their financials each quarter are mind-boggling both with their complexity and their enormous product base. This makes it tough for most analysts and media personalities to plough through and comprehend. Therefore they pick up on the easiest “stuff” to bring to the attention of viewers. For example at the outset of the Exxon earnings the media was ecstatic about the earnings being up. But then someone obviously mentioned revenue and that then became the focus because it’s the “bad” side of things that the media likes in general and that which draws the most attention. But for many investors this “bad side” reporting is what makes for trading opportunities and profits.
On April 24 then, the media decided that XOM stock was “gonna fall hard” and investors sold shares which pushed down Exxon Stock. That’s when I came in and put more capital back to work in Put Selling against Exxon Stock.
Put Selling Exxon Stock
No matter how you look at it, Exxon Mobil is huge and highly profitable. It pays an excellent dividend of $2.52, has a book value of $36.84 and a tiny debt to capital of 6.32%. The volatility within Exxon Stock has pulled back a lot this year but the put premiums are still quite good.
Looking at the April 2013 one month daily chart below you can see that on April 17 the stock pulled back to $85.02 and then climbed higher to almost $90 before the earnings came out. This is typical of a lot of stocks in bull markets as investors push up the stock into earnings. After earnings you can see in the chart the drop in Exxon Stock.
There is a lot of support around the $86 strike and I have sold the $85 put strike for some time.
EXXON Stock 3 Month Daily Put Selling Chart
If we look at the 3 month chart below you can see what I have used to assist in continuing put selling within Exxon Stock for the past several months.
$86 remains at support and selling below it at $85 has returned wonderful results and kept me away from any assignment of shares. I have marked all the key aspects on the chart below. Let’s go over them:
A. Every pull back has created an excellent put selling opportunity and if you look at the put selling trades I have done for 2013 in XOM Stock you can see that put selling on these dips at $85 has been extremely profitable.
B. It is never a guarantee when any stock pulls back that the pullback will be short-lived. The way around that is to do small put selling contracts on the dips. For example Point B is April 15. Exxon stock fell back hard and I sold just 3 naked puts for the $85 strike. Then two days later at Point C, on April 17 the stock hit $85.02 and I sold an additional 5 naked puts again at $85.
By taking my time and scaling into the put selling through different size contracts I don’t use up all my capital at one time and if the stock continues lower which it did, I get to take advantage of even better premiums. This is just like scaling into a stock position and works very well with naked puts. You can review these trades in my 2013 chart for XOM Stock
D. Accumulation / Distribution shows that the stock is being accumulated and selling remains well in control. This tells me that Put Selling at the $85 is probably going to continue to work well until I see that accumulation begin to decline. Then I know the chance of Exxon stock moving lower is increasing and I can hold back on Put Selling with each new dip to wait until I spot where a new bottom might be. For example, the break down to $85.02 on April 17 could easily be signaling that the stock will move lower and set up a lower range sometime in May or June. That means I can turn to the $82.50 put for Put Selling.
E. Look at how often momentum has been negative and how when it is negative momentum really drops off, but accumulation doesn’t. This tells me to make sure to take full advantage of the dips in the stock because although the dips might be low and momentum really can drop off, accumulation does not drop off so the bigger investors (institutions, pensions etc) are buying stock on those dips. This helps to support my Put Selling at the $85 put strike.
F. I like to keep the Slow Stochastic indicator up as well because often it tells me when to look for a rebound in the stock which you can see in the crossover at point F. The Slow Stochastic also shows me when to consider watching for chances to buy back my naked puts for mere pennies and wait for the next downturn. Point G shows the latest crossover down. Once I see that crossover down I then keep an eye out for opportunities to buy back my naked puts for 75% of the premium I made when I sold the puts. Once I buy to close my naked put positions I wait for the next dip in Exxon stock so I can do more put selling. By buying to close early I am also protecting myself from the possibility of the stock falling lower than $85 and getting assigned at $85, when I could be Put Selling the $82.50 or even the $80 if Exxon Stock were to fall lower than I expected. Buying to close early solves a lot of problems with stocks turning around and falling quickly leaving investors with in the money naked puts.
Put Selling The Exxon Stock Slides
You can see from the stock chart above that whereas the recent decline might seem surprising based on the earnings, it is nothing new for Exxon stock over the past several months and indeed the slide we have seen recently is smaller than previous slides earlier this year. All of these slides have been Put Selling opportunities and nothing to be concerned about.
Thank you Media Pundits
Therefore when analysts started talking about the recent slide in Exxon Stock, I simply pulled out my chart and got ready for more Put Selling trades. So there actually is value when investing to keep an ear on the analysts but to remember that what they discuss is the “day’s event” and not the whole story. The media is extremely short-term minded, which for those of us who love Put Selling can work to our advantage. Once the media talks down a big cap like Exxon Stock, I know what the Exxon Stock chart is telling me and when to put my capital back to work.
So while the media pundits do not for the most part understand the stocks they are mentioning, we as investors should know what the true picture is and for Exxon stock that picture tells me that every single dip is another great opportunity to keep compounding my returns through Put Selling against this mammoth company.