$XOM bears hit another gusher

It has taken just over a week for downside option positions in ExxonMobil (XOM) to pay off big again.

On Feb. 26, our Unusual Activity Tracking systems found that 4,000 Weekly $52 puts expiring today were bought for $0.83 with shares at $53.32. This was clearly fresh buying, as volume was well above the strike’s existing open interest of 163 contracts.

Those puts traded for as much as $4.65 today, more than 5.5 times their purchase price. The stock fell 11.2% in the same time frame, showing how quickly options can far outperform moves in their underlying shares on a relative basis.

It is the second winning trade in the name to be posted by Market Rebellion in recent days.

Long puts lock in the price where a stock can be sold no matter how far it might drop, gaining value in a selloff with the potential for significant leverage. The contracts can be purchased either as an outright bearish bet or a hedge on a long-stock position.

XOM ended the session down 4.91% to $47.69 today. The energy giant has continued to trade under pressure amid global economic concerns surrounding COVID-19 and most recently, today after OPEC+ members failed to agree on a production cut.