Profit Pregame

Not the Start the Oil Industry Was Looking For…

Over the last few weeks, I’ve highlighted a few of the reasons why the energy sector – oil in particular – is poised for a huge comeback over the course of this year and beyond.

But for one company one particular, that recovery has gotten off on the wrong foot.

Shares of Exxon Mobil Corporation (XOM) traded down sharply on Friday as news broke that the Securities and Exchange Commission (SEC) is undertaking an investigation into whether an Exxon employee overstating the value of one of its Permian Basin assets.

Allegedly, workers were forced to use unrealistic assumptions about how quickly wells could be drilled to reach a higher valuation. The SEC requires that oil companies report with reasonable certainty the amount of reserves in its wells. The Wall Street Journal reported that at least one of the employees that complained was fired in 2020.

While I still like the prospects of the oil industry as a whole, Exxon Mobil will be one stock I’ll be staying far away from until we know with more certainty whether the SEC will take any punitive actions against the oil giant.

Trading tip of the week

Monday is a national holiday. What does that mean? Traders typically will not want to buy too much premium before a holiday.

If a trader is consistently buying out of the money calls, that means that they are long delta, long gamma, short theta, and long vega. This means that every day that goes by that the stock doesn’t move, the trader will lose money from time decay.

In general, avoid investing heavily in options that have a market holiday between your buy and the expiration date.

Earnings report to watch

Last week saw some really positive earnings beats from both Citigroup Inc. (C) and JPMorgan Chase & Co. (JPM), which could bode well for another well-run bank that reports this week.

Bank of America Corporation (BAC) is scheduled to deliver its Q4 2020 earnings report on Tuesday January 19 before the open.

BAC will not only be a big beneficiary of the broader economic recovery that we’ve discussed here before, but also would stand to add a huge amount of revenue to its balance sheet with even a small increase in interest rates in 2021.

But despite the positive outlook, banking stocks opened mostly down on Friday. BAC started the day off over 3% from its Thursday high, potentially offering a discounted buying position on a stock with great potential.

This Thursday – The 1600 Success Summit

1,600 Americans become millionaires every day… and not by winning the lottery or striking gold.

Most of these people do it all on their own, and I think it’s time you join them.

This Thursday, January 21st at 1:00 p.m. EST, my friend and colleague Abe Wagner is hosting the 1600 Success Summit to show you the truth and dispel the lies you’ve been told about building wealth.

Click here to secure your seat, as spots are filling up fast.

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