How to Play Marathon Oil

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Nov. 8 (Bloomberg) -- Trading Advantage Senior Market Analyst Alan Knuckman discusses his options play for marathon Oil on Bloomberg Television's "Market Makers." (Source: Bloomberg)

We may be coming back and closing higher.

That is very interesting.

The xle has been strong.

It made new five-year highs.

I am looking for a run in marathon.

Mro, to hold this 33 level.

It has been trading between 29 and 38. that is the halfway point.

That is the low we have seen a couple of times this year.

Leaning on the 33 markets to buy the 33 call for april.

It will cost about $400 and it is $300 in the money.

So you are buying the april 30 three spread.

That is in in the money call.

We know you like those.

Why like that?

Stock substitution.

I am able to buy 100 shares with an option here.

It only costs me $400. it is going to act like the stock.

It is going to behave like the stock.

It is a stock substitution strategy.

Limited risk.

It will have a much better payoff than buying the shares because you have the leverage.

A better option than the stock because of the leverage.

The april option gives you five months for the bull trend to be realized.

Marathon is already trading at a 52-week high.

Why is there so much room for marathon to run?

This is the halfway point i'm leaning on at this point.

It should go five dollars above that high, so it should go to 43. 43 is only a 20% move in the stock.

With an option, it will pay off about 100 25%. that is a better return with less risk.

I always put in to a stock half of what i pay for an option.

Essentially, i am risking $200 on the straight.

You are risking $200 on the trade.

What are the key support and resistance levels for marathon?

It is fighting its battle.

I'm leaning on the 33 battle that you can see on your charts.

I am pressing that level.

Leaning on that and looking for to get back to about 38. looking for the oil stocks to come back into play.

We had a bit of a pause in the marketplace.

Energy is going to be a strong sector, as it has been for the last five years.

We started off art chat thing that oil is trading at a four- month low.

There are talks going on between the u.s. and eu ron over a potential nuclear deal.

-- iran over potential nuclear deal.

That is probably going to be bearish.

What is your strategy with marathon if that goes through?

The stock is not dropped even with the price of oil going down.

Technically, i like how oil has gone this week.

A push of about 95 -- i think some of the worst damage has been done in the oil market and i am looking at upward potential and oil.

The worst damage has been done in double oil.

Thank you so much.

Buying the call on marathon.

This text has been automatically generated. It may not be 100% accurate.


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