Oil Prices Will Likely Stay Higher for Longer. An Options Trade on This Energy Stock Set to Benefit
Michael Khouw breaks down this call spread risk reversal options trade.
TL;DR
- Failure of US-Iran negotiations supports a "higher for longer" oil price scenario.
- A specific options trade, the DVN September 2026 $40/50/$60 call spread risk reversal, is suggested for potential profit.
- Devon Energy is highlighted for its operational strengths, Delaware Basin focus, and upcoming merger with Coterra.
- The merger with Coterra is expected to create a leading shale operator with significant synergy targets.
- Potential risks include oil price fluctuations and challenges in integrating the two companies.
- The current geopolitical situation and Devon's position as a North American producer mitigate some risks.
- The options trade offers defined risk with significant upside potential, targeting a $60 price by September expiration.