Exxon Mobil ($72.96, down $1.69) reported earnings that smashed its own record for the biggest profit from a U.S. company, earning an astounding $14.9 billion in the third quarter. That makes back-to-back quarters that Exxon has broken its own record.
The company reported revenues of $138 billion and net income came in at $2.86 a share, versus $9.4 billion, or $1.70 a share, a year ago. Wall Street was expecting Exxon to earn $2.39/ share on revenue of $131 billion.
So let’s get this straight. For the last six months, Exxon has made over $26 billion. That is amazing. Of course, Exxon will justify these hefty profits by saying that the costs of exploration and technology continue to rise and that they are putting most of this money back into the company, but man, that is a ton of cash. Makes you wonder what the real cost of oil should be, huh? Oil companies are coming off a quarter where oil prices had reached an all-time high of nearly $150/ barrel.
The stock is trading lower today despite the record profits because production was down when compared to last year’s quarter. The stock jumped nearly $9 on Tuesday from $66 to $74 so the “big” move had already been made. There’s that classic buy the rumor, sell the news trade.
The chart for Exxon is improving and today’s slight decline should help fill in some of the gaps it made from Tuesday’s strong push. If we can get a strong base here, the stock could make a run to $80 where it would face some resistance. Short-term option traders are targeting the November 80 calls (XOMKP, $1.85, down $0.35) while longer-term option traders are focusing on the January 85 calls (XOMAQ, $2.75, down $0.75).
I like a few other sectors more than oil right now (like the casino stocks) but there has been plenty of action in Exxon’s options today.
Rick Rouse
Rick@OptionsMentoring.com
Potash Smokes Higher
Thursday, October 30th, 2008
Like a tide that lifts all boats, the market’s recent rally has helped push shares of Potash (POT, $84.71, up $5.31) higher over the past three trading sessions. The stock hit a low of $60 last Friday and has quickly reversed course and held above $80 all day.
On October 21 and 22, I profiled the November 80 calls (PVZKP, $11.30, down $3.50) and the 2010 January 180 calls (WPTAW, $6.10, up $3.50) as high risk/ high reward trades. The November 80 calls have returned 140% as they were trading for $4.70 at the time. The January 180 calls are way out-of-the-money but have value simply because Potash can be an explosive stock. These calls were trading for $3.00 at the time of the blog and have easily doubled.
The trade was balanced so that if the November calls did not perform up to expectations then we still had insurance with the January 2010 calls which do not expire for another 16 months. Today, we got the best of both worlds as Potash looked strong all day.
The market has shown some strength this week and it looks like we may get out of October without another bomb dropping. The short-term oulook is up especially with the election right around the corner. This is normally a bullish time for the market and this rally could continue into next week. However, place stops accordingly, at least 75%-100% above your entry prices.
Rick Rouse
Rick@OptionsMentoring.com
Tags: LEAPs, Potash, Potash call options
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