While traditional safe havens such as gold bullion arguably offer the best protection against inflation, energy giants such as Exxon Mobil (NYSE:XOM) could also act as a powerful hedge against rising consumer prices. True, more people are pivoting toward electric vehicles. However, society overwhelmingly runs on hydrocarbons — and this fact might not change for a long time, imbuing XOM stock with a strong sense of relevance.
Further, because hydrocarbons are so critical in other modes of transportation, the sector will likely keep humming. Plus, the Trump administration has made it abundantly clear that it will pursue expansion of fossil-fuel-related projects. On a net basis, the political backdrop is incredibly favorable for XOM stock. Though Exxon Mobil isn’t going to win any environmental kudos, it’s operating in a paradigm where it doesn’t need any.
Interestingly, global dynamics should also smile on XOM stock. According to the Organization of the Petroleum Exporting Countries and its allies — known as OPEC+ — air and road travel will continue to buttress consumption. Further, the coalition stated that trade tariffs are unlikely to materially crimp global economic growth.
Fundamentally, this narrative could potentially move the needle for the oil giant. Presently, the consensus view among Wall Street analysts is that the company will generate revenue of $340.36 billion for the current fiscal year. However, this metric would be 2.64% down from last year’s print of $349.58 billion. Still, given the latest OPEC+ data, it’s possible that the high-side estimate of $372.13 billion could be a reality.
If that’s the case, fiscal 2026 sale estimates may need to be revised upward. Right now, analysts are looking for a top line of $351.89 billion. However, the most optimistic target calls for just over $385 billion. With the potentially positive framework, the current price-to-sales ratio of 1.37X could be quite a discount.
In the movie Moneyball, the central motif was that baseball teams were judging players incorrectly, relying on outdated scouting methods instead of objective, data-driven analysis. As such, the cash-strapped Oakland A’s — led by Billy Beane (and portrayed by Brad Pitt) — exploited inefficiencies in player valuation by prioritizing on-base percentage (OBP) and other undervalued stats.
What does this have to do with XOM stock and the market in general? Standard risk modeling approaches on Wall Street are making the same mistakes that baseball made many years ago. Instead of merely analyzing mountains of data, it’s important to assess the information that best harmonizes with the current situation at hand.
For example, on a temporal basis, pricing data for XOM stock over the past five years demonstrates an upward bias. A position entered at the beginning of the week has a 54.58% chance of rising by the end of it. Over a four-week period, the long odds rise slightly to 55.21%.
However, last week, XOM stock lost almost 2%. Whenever XOM loses up to 5%, investors tend to get a little more greedy. Conspicuously, in the subsequent week following a modest decline in weekly value, XOM has a 58.49% chance of rising. Over a four-week period, the long odds improve to almost 61%. Therefore, speculators have an extra incentive to speculate beyond the compelling fundamentals.
It’s worth pointing out that in the four-week positive scenario, the median return is a little over 6%, placing the upside target at $114.79. Here’s what’s really interesting. Based on the expected move calculator — which involves multiplying the three metrics of price, implied volatility and time decay adjustment — which reverse engineers the market’s expected range of price mobility, market makers are likely anticipating an upper bound of no greater than $112.59.
In other words, XOM stock call options could potentially be mispriced — in your favor.
Based on probabilities calculated dynamically (instead of merely stochastically), there’s a roughly 61% chance that XOM stock could rise by 6% by the options chain expiring March 14. If so, speculators may want to position themselves ahead of the move.
An aggressive way to do this is to consider a multi-leg options strategy called the bull call spread; specifically, the 108/112 (buy the $108 call, simultaneously sell the $112 call). In this strategy, the speculator is hoping that XOM stock reaches or rises above the short strike price ($112) at expiration. If this condition is met, the trader would collect the maximum payout, which presently stands at nearly 113%.
What makes this trade attractive is the relatively low positional risk of a $188 cash outlay. Should the maximum reward be triggered, the trader could earn $212. It should be acknowledged up front that the market views this transaction as a very low probability affair — hence the high payout.
But just like in Moneyball, I believe there’s a fundamental misunderstanding of how analysts should assess risk. Therefore, it’s my opinion that XOM call options are undercutting the equity’s true potential.
