XOM December 2027 Options Begin Trading

The article details two options strategies for Exxon Mobil (XOM) shares, aiming to enhance yield or optimize entry points. Selling a $105.00 strike put, bid at $11.40, offers an effective cost basis of $93.60 for potential acquisition, with a 66% probability of the 7% out-of-the-money option expiring worthless, yielding an 10.86% (4.44% annualized) return on the cash commitment. Alternatively, a covered call strategy, selling a $115.00 strike call for $14.35 against owned XOM shares, projects a 14.72% total return if called away, or a 12.73% (5.21% annualized) premium boost if the 2% out-of-the-money call expires worthless (43% probability). These strategies leverage options premiums to improve returns on XOM, with implied volatilities (26% for put, 24% for call) aligning closely with the 24% trailing 12-month actual volatility.

Analysis

The provided text outlines two specific, long-dated options strategies for Exxon Mobil (XOM) shares, currently trading at $112.75. The first strategy, selling a December 2027 cash-secured put with a $105.00 strike, generates an $11.40 premium. This approach offers investors interested in acquiring XOM a potential entry point at an effective cost basis of $93.60 per share. There is a 66% statistical probability of this out-of-the-money put expiring worthless, which would result in a 10.86% return on the committed capital, or a 4.44% annualized yield. The second strategy involves a covered call, selling a December 2027 $115.00 strike call for a $14.35 premium against existing shares. This strategy would generate a total return of 14.72% if XOM is called away at expiration, but caps further upside. If the option expires worthless (a 43% probability), the premium provides a 12.73% return boost, or a 5.21% annualized yield. The analysis is supported by volatility data, which shows the put's implied volatility at 26% and the call's at 24%, closely aligning with the stock's 24% trailing twelve-month actual volatility, suggesting the options are not priced with an unusual risk premium compared to recent history.

Key Decisions for Investors

• Investors bullish on Exxon Mobil but seeking a lower entry point could consider selling the December 2027 $105 put to collect a substantial premium, effectively lowering their cost basis to $93.60 if assigned.
• Current XOM shareholders with a neutral to moderately bullish outlook could evaluate the covered call strategy by selling the December 2027 $115 call to generate a 5.21% annualized yield, while accepting a cap on potential upside above the $115 strike price.
• Given that implied volatility (24-26%) aligns closely with historical volatility (24%), the options appear fairly priced relative to recent price action, but investors must be comfortable with the long-term capital commitment until the December 2027 expiration and the associated opportunity costs.