This oil drilling stock is remarkably cheap. How to trade it with options
Michael Khouw breaks down how to trade this energy name using options.
TL;DR
- The "Dogs of the Dow" strategy targets underperforming stocks with high yields within the Dow Jones Industrial Average for potential mean reversion.
- Crude oil prices have fallen, negatively impacting oil and gas investors despite benefiting consumers.
- The Energy Select Sector Index has underperformed the S&P 500 and technology sector year-to-date.
- Coterra Energy, an E&P company, operates in key basins and exceeded production guidance.
- Coterra has a low breakeven cost compared to peers and is expected to generate significant free cash flow.
- The company offers a dividend yield of almost 3.4%, has a remaining stock buyback program, and is trading at approximately 10x forward earnings estimates.
- Global energy demands continue to rise, and oil and gas remain critical industries.
- The article suggests considering Coterra Energy as a stock worth owning due to its dividend and position in the market.
- A "buy write" strategy, selling calls against Coterra stock, is mentioned as an option to increase yield.