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OIB Trade Alert: DVN

Devon Energy (DVN) is rallying today with oil prices following news that Russia will cut oil production by 500,000 barrels a day next month following the announcement of price caps by Western countries.

However, our DVN Feb Week Two (2/10) 65 Put is deep in the money. I am recommending we accept shares.

The company is scheduled to announce earnings on Tuesday. Therefore, we will be selling our shares on Monday to avoid earnings risk.

If DVN happens to run up into the announcement, it’s possible we could exit the position around breakeven or at a small loss given that our cost basis on shares is just 2.5% above where the stock is currently trading, and DVN is volatile.

If not, we will look to re-enter the position following the company’s earnings announcement by selling a put.

Current Stock Price: $62.26

Cash in Hand: $1.17

Action: Accept shares

Cost Basis: $63.83

Potential Rate of Return: I am targeting breakeven on this position

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