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Jun 17, 2022

Top 3 Energy Stocks to Trade in June 2022

By:Ryan Sullivan

Why trade energy stocks in June 2022?

Volatility in the energy sector is currently very high and the opportunity for selling premium in energy stocks is abundant. Many of the stocks in the energy sector have IV ranks approaching range highs, including the stocks in this list. This is important because we want to sell premium in underlying assets when the volatility is high in the hope that volatility will come down in the near future, thereby allowing us to buy back our options for a profit.

When IV rank in an asset is at the top of a historical range, we can use that as an indicator to sell premium at a time when we expect IV rank to revert. We can expect this because each underlying asset has a market that reacts to larger market influences in unique ways. Any given energy stock will react to world events in its own measured way.

For example, if one source of refined oil stops operating and stops delivering oil, other sources of refined oil will have measurable market reactions to that event, which will be represented and accounted for in the equities market. The energy sector has a relationship with commodities and broader economic consumption that we can take advantage of.

Top 3 Energy Stocks to Trade in June 2022

  1. Hess Corp (HES)
  2. Schlumberger N.V. (SLB)
  3. Marathon Petroleum Corp (MPC)
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Fig. 1: Six-month price percent change chart for SPY, HES, MPC, and SLB

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 Hess Corp (HES)

Hess Corporation is an integrated energy company that engages in the exploration, production, development, transportation, purchase and sale of crude oil, natural gas liquids, and natural gas. Hess provides gathering, loading, and transporting operations for both crude oil and natural gas liquids. Currently, the company has two operating segments, Exploration and Production (E&P) and Midstream. Midstream is defined as “the sector that involves the transportation (by pipeline, rail, barge, oil tanker or truck), storage, and wholesale marketing of crude or refined petroleum products.”

Hess is currently trading at $103.39, down 21.35 percent from a recent all-time high price of $131.46 on June 8th, 2022. At the money options for the August expiration contracts are about $0.40 wide. IV rank is currently 80.9, based on the tastyworks platform calculation. HES established its recent IV rank range in December of 2021, which is currently ranging from about 30 to 85. Midday on June 17th, 2022, HES has traded about 3 million shares. These factors make HES a good choice from premium selling strategies.

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 Schlumberger N.V. (SLB)

Schlumberger N.V. is an oilfield services company that provides services to the oil and gas explorers, and producers globally. Schlumberger helps the upstream energy players to locate oil and gas and to drill and evaluate hydrocarbon wells. Upstream is defined as “the sector that includes searching for potential underground or underwater crude oil and natural gas fields, drilling exploratory wells, and drilling and operating the wells that recover and bring the crude oil or raw natural gas to the surface.” Schlumberger conducts its business through four segments, Digital and Integration, Reservoir Performance, Well Construction and Production Systems.

Schlumberger is currently trading at $37.02, down 25.71 percent from a recent all-time high price of $49.83 on June 8th, 2022. SLB is currently testing a support level that was established in March of 2022. At the money options for the August expiration contracts are about $0.10 to $0.15 wide. IV rank is currently 82.5, based on the tastyworks platform calculation. SLB established its recent IV rank range in March of 2022, which is currently ranging from about 35 to 85. Midday on June 17th, 2022, HES has traded about 11.5 million shares. These factors make HES a candidate for premium selling options strategies, such as a short strangle or short put spread.

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 Marathon Petroleum Corp (MPC)

Marathon Petroleum Corp is a leading independent refiner, transporter and marketer of petroleum products. Marathon operates in two segments: Refining, Marketing and Pipeline Transportation. Marathon sells transportation fuels, asphalt and specialty products throughout the United States to support commercial, industrial and retail operations.

Marathon is currently trading at $86.47, down 24.37 percent from a recent all-time high price of $114.34 on June 8th, 2022. SLB is currently testing a consolidation level that was established in April of 2022. At the money options for the August expiration contracts are about $0.10 to $0.15 wide. IV rank is currently 110.6, based on the tastyworks platform calculation. MPC established its recent IV rank range in January of 2022, which is currently ranging from about 25 to 90. Although at 110 IV rank MPC has broken through the range and continues to see strong downside pressure. Midday on June 17th, 2022, MPC has traded about 7.25 million shares. These factors make MPC a candidate for premium selling options strategies, such as a short iron condor or short put spread.

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