Market Overview

Bullish Options Trade On The Energy Stocks

Share:
Related XLE
Why Oil Could Fall To $23 Per Barrel
Fast Money Halftime Report Final Trade From January 6
These 5 Signs Indicate That Oil May Have Already Hit Rock Bottom (Seeking Alpha)

Carter Worth talked on CNBC's Options Action about possible future price movement of Energy Select Sector SPDR ETF (NYSE: XLE).

He said that when the crude oil traded more than 15 percent lower the energy stocks outperformed S&P 500 over the next five months. The energy stocks outperformed the S&P 500 0.41 percent one month after such an event; after three months the space was better than the broad index by 1.99 percent; and in five months after a decline in crude oil it outperformed S&P 500 on average 2.63 percent.

Worth has also showed the XLE chart and he pointed to four intermediate declines, similar by size and duration. The corrections were between seven percent and 9.5 percent and it lasted between 22 and 32 days. The last correction is the smallest, only seven percent and its duration is 32 days. After each correction XLE rebounded and Carter Worth thinks that it will bounce again.

Mike Khouw suggested a bullish options strategy, based on Worth's analysis. He would buy the December quarterly 95 call options for $4. The break even for this trade would be at $99.

Dan Nathan would probably look to spread this trade and he added that he disagrees with the analysis. He thinks that the momentum is broken.

Posted-In: CNBC Long Ideas Sector ETFs Options Markets Media Trading Ideas ETFs

 

Related Articles (XLE)

Around the Web, We're Loving...

Get Benzinga's Newsletters