Option Trade On Royal Dutch Shell

Crude oil prices have tanked liked nothing else in the last 6 months. Needless to say that the oil sector, in particular the non-diversified oil companies have been hit very hard. However, according to traders, after suffering tremendous declines these companies have now come down to lucrative levels, especially Royal Dutch Shell plc (ADR)RDS, whose dividend yield is now touching 6%.

OptionPit.com Founder Mark Sebastian was recently on Bloomberg to discuss the changes in oil prices and how it has impacted oil companies. He also shared his options play on Royal Dutch Shell.

“Well, crude is killing the non-diversified oil companies, those that have very specific sectors of oil they work in, the drillers, the pipelines, the services, but where I think there is some hidden strength is in some diversified vertical oil companies. The Chevron Texacos , Exxon Mobils, Royal Dutch Shell, Bps of the world, those that go from drilling to all the way to selling at the gas station have shown some resilience, some strength here and really are now at levels that I think have started to look really appetizing,” Sebastian said.

“Royal Dutch Shell in particular, trading at around 67 bucks a share. It pays a dividend yield now close to 6 percent at these levels. I really like it as a long term investment”

On his options trade on Royal Dutch Shell, Sebastian said, “a trade I would do is to sell the January 67.5 puts at 2 bucks allows me to take delivery on the stock below 67.5”