Pairing CVX and XOMCVX reached a major Monthly Resistance in the past week and today saw major volume in sold shares and bought Puts which drew my attention. CVX Option volatility is still above average so the best play would be buying Vertical Put Spreads. Buying the September 16 95/92.5 Spread for $0.58 yields a greater than 3:1 Reward/Risk if it reaches max profit. I'm aiming for a 8.5% bearish move with earnings one month away to act as a catalyst which is reasonable.
The best company to hedge the short trade with in terms of industry and market cap is XOM. For the hedge to match the risk and movement I went with the October 16 95/97.5 Call Spread for $0.60. I'm aiming for a 8.5% bullish move and this stock also has earnings on the same date a month away.
Expectancy on this trade is 54% with 2.4:1 Reward/Risk.
