Recent gains have pushed the oil giant’s stock price to exxon mobil The current yield is 2.7%, the lowest since 2014 and slightly higher than what dating site Match Group pays its shareholders.
Exxon’s dividend has been one of its key selling points, especially to investors in the retail space.
So what if you own stocks for income purposes? Let’s look at options.
Exxon now presents a compelling case for a “buy write with a twist” known as a covered call spread. This strategy allows investors to collect premium income while maintaining room for capital appreciation. This is a necessary feature if the stock exhibits the fundamental and technical strength currently seen in XOM.
Macro and fundamental catalysts
Exxon operates in the sweet spot of capital discipline and favorable market trends. As energy demand is expected to remain strong, the company focuses on high-margin production, generating exceptional free cash flow. From a valuation perspective, XOM remains attractive with a low EV/EBITDA multiple.
Furthermore, recent upward revisions to earnings estimates indicate that analysts recognize the company’s operating efficiency. Over the past five years, Russell 1000 constituents have combined rising earnings estimates with high free cash flow yields to deliver significantly better monthly returns, especially when their technical setups are also favorable…and they are.
Exxon, 1 year
XOM is trading comfortably above its rising long-term moving average. This price action suggests that there is some buy-in and that support from institutional investors remains solid.
Strategy: Strengthen buy-write
Instead of a standard covered call, which limits all upside to the strike price, this strategy overlays a long position in the stock with a credit call spread (also known as a “short” call spread).
Long: XOMS 100 Stock Sell: June 26 $165 Call (Collect $2.20) Buy: June 26 $170 Call (Pay $0.90) Net Credit: ~$1.30 per share Skill Level: Intermediate
Why “twist”?
Selling a $165/$170 vertical product against a stock generates a $1.30 credit, giving you a 0.8-1.0% “yield” over the next six weeks. However, the $170 long leg acts as insurance against a major breakout. If XOM rises above $170, investors will participate in all profits above that level, effectively “unleashing” the upside that would have been foregone with a traditional covered call.
This structure is perfectly aligned with XOM’s current momentum and provides immediate income while leaving the door open for significant upside.
