Back Derivatives Strategy

Massive Outperformance to Oil and Rally Back to Long-Term Resistance Make Exxon (XOM) Put Spreads a Very Attractive Proposition at This Time

Published on December 28, 2025

Jeff Jacobson

Given the persistent weakness in oil this year, the relative performance by the largest integrated US oil company, Exxon Mobile (XOM), is extremely impressive. While crude has declined by ~ 16% YTD, XOM shares have a total return of nearly 15% (barely below the 19.3% YTD performance by the S&P). With crude prices falling sharply again on Friday, and XOM marginally lower, the relative spread between XOM and the price of oil now stands at a multiyear high. Given this massive divergence, there are many reasons why I believe owning “cheap” downside option structures in XOM makes a lot of sense as either a hedge to a long XOM (or energy sector overweight position), or as a bet that we see a “catch-up” trade to the downside in the coming months.

XOM spread to oil now at a multiyear high

A graph with orange and white lines

AI-generated content may be incorrect.

XOM shares are up 15% YTD while crude has tumbled by over 16%

A screenshot of a computer

AI-generated content may be incorrect.

Here are some of the reasons why I believe we can see XOM trade lower to “catch-up” to where crude currently trades:

1. XOM shares now once again up against major long-term resistance

Except for one “false” breakout in Oct 2024, XOM shares have traded in a very narrow range between 96 and 122 for over three years now. The last SEVEN times shares have traded upwards of 120, we have seen them fail and trade back lower (and sometimes in a rather rapid fashion). Unless oil, which seems to be the only commodity not currently working, have a very sharp reversal higher it seems rather unlikely that XOM share can continue to “ignore” this weakness in crude.

XOM shares now back at the top-end of the 3+ year range where it has failed several times already

A screen shot of a graph

AI-generated content may be incorrect.

2. XOM has sold off on 9 of the last 10 times it has reported earnings

While we haven’t seen any significant declines on the earnings-related selloffs, the fact that XOM has only been able to rally once (albeit very small) over the last 10 reports doesn’t bode well for this upcoming quarter (especially given huge outperformance we have seen by XOM to oil of late). Put another way, oil averaged ~ $62.70 in Q3, while it has averaged ~ $58.80 thus far in Q4 (yet XOM shares have moved up from ~ 112 to 119 over that time).

XOM shares have a decided bias lower when they report earnings of late. Given the outperformance to crude, hard to see that change this quarter

A screenshot of a computer screen

AI-generated content may be incorrect.

3. XOM has also sharply outperformed Chevron (CVX) since August

XOM hasn’t just been outperforming oil, it has significantly outperformed CVX since August as well. In fact, the XOM/CVX relative spread is now just below the Oct 2024 highs, we then saw XOM decline sharply shortly after, and the relative spread “normalize”. Given this similar setup, it seems we could see another move lower in XOM shares over the next few months.

XOM/CVX relative spread now just below the Oct 2024 highs. We saw XOM decline ~ 20% shortly after as the spread normalized

A graph of stock market

AI-generated content may be incorrect.

4. XOM puts are CHEAP

Thanks to market volatility (VIX) moving back to the lows, XOM vol has also followed. Looking at the Feb 5% out of the money puts, implied vol on those now are just above the 1-year lows. Considering the outperformance to both oil and the other major integrated names (like CVX), and the rally into major long-term resistance, I believe the risk/reward of owning “cheap” downside structures looks very favorable.

XOM 2-month (Feb) 5% out of the money put implied vol is back at the 1-year lows

A graph with white lines on a black background

AI-generated content may be incorrect.

Given this setup, here is a trade I suggest to either hedge XOM (or energy sector), or as a limited-risk bearish bet:

Buy XOM Feb 115/105 put spread for ~ $1.65 (XOM 119.11 Fri closing price ref)

Trade Details:

Put spread starts 2.6% lower (after factoring expected dividend in mid-Feb)
Feb structure will capture next earnings at the end if Jan (stock has a decided bias lower on earnings of late)
Trade offers a better than 5x to 1 payoff on the limited risk bet and is capped to the downside 11% lower and just below the August lows ~ 105
Structure can be bought to hedge long exposure to XOM stock (or the energy equity complex), or as a limited-risk bearish bet
XOM sitting just below clear long-term resistance ~ 120
Put vol back to the 1-year lows
Please contact me or the 22V sales team for updated pricing and execution capabilities

DISCLOSURES AND DISCLAIMERS

Analyst Certification

The analyst, 22V Research Group, primarily responsible for the preparation of this research report attests to the following: (1) that the views and opinions rendered in this research report reflect his or her personal views about the subject companies or issuers; and (2) that no part of the research analyst’s compensation was, is, or will be directly related to the specific recommendations or views in this research report.

Analyst Certifications and Independence of Research.

Each of the 22V Research analysts whose names appear on the front page of this report hereby certify that all the views expressed in this Report accurately reflect our personal views about any and all of the subject securities or issuers and that no part of our compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views of in this Report.

22V Research (the “Company”) is an independent research provider. The Company is not a member of the FINRA or the SIPC and is not a registered broker dealer or investment adviser. 22V Research has no other regulated or unregulated business activities which conflict with its provision of independent research.

22V Research, LLC is a professional services and independent publication organization. 22V Research, LLC is not a securities broker-dealer, not a member of the Financial Industry Regulatory Authority (FINRA), not a registered investment advisor (RIA) and not a member of SIPC.

Securities transactions, when offered, are offered by 22V Securities, LLC through LPS Capital, LLC. Certain employees of 22V Securities, LLC are dually registered as securities representatives of LPS Capital, LLC or Analyst Hub Securities, LLC. 22V Securities, LPS Capital and Analyst Hub Securities are members FINRA, SIPC.

https://brokercheck.finra.org/

Current Ratings Definition.

SECTOR OUTPERFORM: An “outperform” rating anticipates the company will outperform the S&P Regional Banking Index (peer group).

SECTOR PERFORM: A “market perform” rating anticipates the company will perform in line with the S&P Regional Banking Index (peer group).

SECTOR UNDERPERFORM: An “underperform” rating anticipates the company will underperform the S&P Regional Banking Index (peer group).

Limitation Of Research And Information.

This Report has been prepared for distribution to only qualified institutional or professional clients of 22V Research Group. The contents of this Report represent the views, opinions, and analyses of its authors. The information contained herein does not constitute financial, legal, tax or any other advice. All third-party data presented herein were obtained from publicly available sources which are believed to be reliable; however, the Company makes no warranty, express or implied, concerning the accuracy or completeness of such information. In no event shall the Company be responsible or liable for the correctness of, or update to, any such material or for any damage or lost opportunities resulting from use of this data. Nothing contained in this Report or any distribution by the Company should be construed as any offer to sell, or any solicitation of an offer to buy, any security or investment. Any research or other material received should not be construed as individualized investment advice. Investment decisions should be made as part of an overall portfolio strategy and you should consult with a professional financial advisor, legal and tax advisor prior to making any investment decision. 22V Research Group shall not be liable for any direct or indirect, incidental or consequential loss or damage (including loss of profits, revenue or goodwill) arising from any investment decisions based on information or research obtained from 22V Research Group.

Reproduction And Distribution Strictly Prohibited.

No user of this Report may reproduce, modify, copy, distribute, sell, resell, transmit, transfer, license, assign or publish the Report itself or any information contained therein. Notwithstanding the foregoing, clients with access to working models are permitted to alter or modify the information contained therein, provided that it is solely for such client’s own use. This Report is not intended to be available or distributed for any purpose that would be deemed unlawful or otherwise prohibited by any local, state, national or international laws or regulations or would otherwise subject the Company to registration or regulation of any kind within such jurisdiction.

Copyrights, Trademarks, Intellectual Property.

22V Research Group, and any logos or marks included in this Report are proprietary materials. The use of such terms and logos and marks without the express written consent of 22V Research Group is strictly prohibited. The copyright in the pages or in the screens of the Report, and in the information and material therein, is proprietary material owned by 22V Research Group unless otherwise indicated. The unauthorized use of any material on this Report may violate numerous statutes, regulations and laws, including, but not limited to, copyright, trademark, trade secret or patent laws.