[Options] True Pioneers

Sean McLaughlin
August 2, 2023

Sector rotation continues to pump new blood into the bull market that's been running for over a year now (yes, over a year, hater). And as it does, we love getting into stocks that are late joiners. These stocks have seen some tremendous rips. Just look at the chart of Caterpillar ($CAT) as but one of numerous examples I can point to. That's what today's trade has the potential to do.

Our Commodities Analyst Ian Culley recently reported on several energy stocks we need to be paying attention to. And one of them just got earnings out of the way. Implied volatility priced into its options was already suspiciously low before the earnings report, so this sets up a great opportunity for a simple long calls play.

And we've got a big round number up ahead that would represent new all-time highs which should act as a magnet to help us out.

Here's what Ian had to say about $51B explorer and producer Pioneer Natural Resources $PXD:

PXD is reclaiming its prior-cycle peak from 2018, much like crude oil.

The PXD chart also resembles the Southwestern Energy Company $SWN and SilverBow Resources $SBOW charts. (I’ll outline those setups in the coming weeks.)

I like PXD long above those 2018 highs at approximately 215, targeting 315.

Let's get after it!

Here's the Play:

I like buying $PXD January 260 calls for approximately $7.00 per contract. This is a simple, defined-risk bet on $PXD joining the party and making a run at $300 per share (the rare three-hundred-dolla-roll!)

As long as $PXD can hold above $215 per share, then this trade remains valid to me and I'll keep the position on. Any close below and I'll exit the position and move on.

If $PXD breaks above last October's high around $275, then I'll look to take my original risk out of the trade by selling enough of my position to pay me back for my original investment -- then I'll have a risk-free ride with the rest, riding sizable gains to add some comfort to the journey!

If you have any questions on this trade, please send them here.

~ @OptionsSean

P.S. We do trades like this regularly. If you'd like to leverage Best-in-Class technical analysis into smarter directional options trades, try out All Star Options Risk Free! Or give us a call to learn more: 323-421-7991

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