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Energy Options Expensive with Fall In Crude Oil Prices. Chevron Notable Outlier

Jun 11, 2019

 

Diverse Option Strategies for All Risk LevelsDiverse Option Strategies for All Risk Levels
Diverse Option Strategies for All Risk LevelsDiverse Option Strategies for All Risk Levels

 

Russell 1000 Energy Stocks with Most Expensive 30-Day Volatility

Name Ticker 30-Day
Implied Volatility
90-Day
Implied Volatility
30-Day
Percentile
90-Day
Percentile
30-Day Percentile for
Implied-Realized Spread
90-Day Percentile for
Implied-Realized Spread
CNX Resources Corporation CNX 50.87 51.4 99.21% 100.00% 44.44% 61.90%
QEP Resources, Inc. QEP 74.24 58.61 95.63% 90.48% 78.17% 89.29%
Antero Resources Corporation AR 56.24 57.18 94.44% 97.22% 38.10% 66.27%
Range Resources Corporation RRC 59.48 58.56 94.05% 96.03% 44.05% 95.24%
Chesapeake Energy Corporation CHK 80.15 78.69 91.27% 94.44% 36.51% 90.08%
Halliburton Company HAL 39.8 38.98 90.08% 92.06% 48.02% 81.35%
Centennial Resource Development, Inc. CDEV 61.38 62.18 87.70% 93.85% 77.38% 86.51%
Transocean Ltd. RIG 60.47 57.61 86.51% 86.90% 91.27% 93.65%
National Oilwell Varco, Inc. NOV 39.95 40.26 85.52% 94.44% 61.11% 64.29%
PBF Energy Inc. PBF 45.92 42.59 84.92% 87.70% 11.90% 41.67%

 

Russell 1000 Energy Stocks with Cheapest Expensive 30-Day Volatility

Name Ticker 30-Day
Implied Volatility
90-Day
Implied Volatility
30-Day
Percentile
90-Day
Percentile
30-Day Percentile for
Implied-Realized Spread
90-Day Percentile for
Implied-Realized Spread
Anadarko Petroleum Corporation APC 11.98 15.06 5.56% 7.14% 95.24% 7.14%
Cheniere Energy, Inc. LNG 26.6 27.45 16.67% 28.57% 25.79% 69.44%
Kinder Morgan, Inc. KMI 18.58 19.94 27.38% 31.75% 61.51% 88.89%
Cabot Oil & Gas Corporation COG 29.76 30.88 31.75% 39.68% 25.00% 76.59%
Chevron Corporation CVX 18.27 19.5 35.52% 47.22% 48.81% 37.70%
ONEOK, Inc. OKE 19.75 20.62 35.71% 59.92% 40.08% 96.03%
Kosmos Energy Ltd. KOS 45.29 51.7 37.50% 55.95% 38.89% 80.16%
Extraction Oil & Gas, Inc. XOG 67.09 73.7 37.70% 54.37% 16.27% 31.35%
The Williams Companies, Inc. WMB 21.91 23.19 48.81% 50.00% 32.94% 62.30%
Apergy Corporation APY 66.44 44.72 49.39% 57.32% 61.59% 65.85%

 

  • Not a surprised to see implied volatility elevated for large-cap energy stocks after the recent drop in WTI -16.6% and Brent Crude -11.86% since the end of April
    • Of the 52 energy stocks in the Russell 1000, over 34 have 30-day options whose implied volatility is in the 60%+ percentile
  • While overall implied volatility is rich, risk premium are notably wide
    • This would suggest that many of these stocks have been selling off with the drop in crude oil prices over the past month or so
      • Special Trader’s Note: Remember, volatility for stocks tends to increase when they sell-off and drop when stocks rally
  • Notable energy stocks with “expensive” options includes Haliburton (HAL) and Transocean (RIG)
    • Surprising to HAL on this last given the stability of the services business
    • HAL is rated "Unattractive" inour US Large-Cap Global Top Stock Ideas
    • RIG is not rated in our Global Top Stock Ideas
    • SLB is rated "Unattractive" inour US Large-Cap Global Top Stock Ideas
  • Fascinating to see Chevron (CVX) options so cheap given the fact is a mega-cap oil company and highly traded
    • Intuitively, would expect CVX options to be elevated along with the energy sector since it is a proxy stock for energy
    • CVX is rated "Top Buy" inour US Large-Cap Global Top Stock Ideas

 

 

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