Focus Stock of the Week: ExxonMobil

In the ever-shifting energy landscape of 2026, ExxonMobil (XOM) has transitioned from a traditional oil giant to a diversified molecule and electron powerhouse. For investors seeking a blend of defensive stability and capital growth, XOM remains a premier best-in-breed pick.

Why XOM is a Strong Investment in 2026
The investment thesis for ExxonMobil rests on three pillars: efficiency, scale, and shareholder commitment.

Low-Cost Production Dominance: Following the landmark acquisition of Pioneer Natural Resources, Exxon has solidified its crown in the Permian Basin. With high-margin assets in Guyana and the U.S., the company’s breakeven cost remains below $40/bbl. This allows XOM to remain highly profitable even if oil prices soften.

Structural Cost Savings: XOM is on track to achieve $20 billion in cumulative structural cost savings by 2030. Management’s relentless focus on execution excellence means that earnings and cash flow are growing at constant prices, decoupling the stock's performance from pure commodity volatility.

A Dividend Aristocrat on Steroids: As of early 2026, XOM has increased its dividend for 43 consecutive years. With a forward yield of approximately 2.7% and a massive $20 billion annual share buyback program through 2026, the company is effectively a cash-return machine.

Taking Advantage with a Poor Man’s Covered Call (PMCC)
The covered call strategy can be done 2 ways (buying 100 shares or buying 1 call option). The Poor Man’s Covered Call (PMCC) allows you to control 100 shares of XOM for a fraction of the cost.

1. The Setup: Buying the Lease
   Instead of spending $15,000+ to buy 100 shares at current market prices, you buy a deep In-The-Money (ITM) Long Call with an expiration date far in the future (a LEAPS).

Target: A call with a Delta of 0.80 or higher. This ensures the option price moves almost dollar-for-dollar with the stock.

Benefit: This acts as your synthetic stock position, requiring significantly less capital while maintaining upside exposure.

Buy to Open Jan 15, 2027 Call @$38.50.

1. The Income: Selling the Rent
   Once you own the long LEAPS, you sell (write) a Short-Term, Out-Of-The-Money (OTM) Call against it, typically with an expiration of 30–45 days.

Target: A strike price where you believe XOM is unlikely to reach within the month.

Outcome: The premium you collect from the short call reduces your overall cost basis and offsets the time decay of your long position.

Sell to Open April 17, 2026 160 Call @$2.40.

1. Why PMCC fits XOM
   Because XOM is a relatively stable, low-beta stock (~0.4), it is an ideal candidate for this strategy. You benefit from the steady upward climb of the stock and its advantaged production growth, while the monthly premiums you collect act as a synthetic dividend that can often exceed the actual yield of the shares.

Estimated ROI Scenarios

1. Scenario A: The Steady Income (Flat Move)
   If XOM stays exactly at $152 through April 17:

• Your short call expires worthless, and you keep the $240.
• Monthly ROI: 6.6% ($240 / $3,610).
• Note: Compare this to the stock’s actual dividend yield of ~2.7% per year. You are outperforming the dividend in a single month.

1. Scenario B: Bullish Growth (Stock hits $158)
   If XOM climbs to $158 (near your short strike):

• LEAPS Gain: Your long call gains approximately $490 in value (Delta 0.82 $\times$ $6.00 move).
• Short Call: Expires worthless (or you buy it back for pennies to close).
• Total Profit: $730 ($490 gain + $240 premium).
• Trade ROI: 20.2% in just over a month.

1. Scenario C: The "Breakout" (Stock hits $165)
   If XOM rockets past your $160 ceiling:

• You will likely need to roll your short call to a later date and a higher strike.
• Even if capped, your profit is the difference between the strikes ($160 - $120 = $40 value) minus your entry cost ($36.10).
• Max Profit (if assigned): $390 per contract, or a 10.8% return.

To your success,

Thomas Moore

Disclosure: The author will be long XOM within 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.

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