Using options to trade this oil giant after its earnings came out this week

Halliburton reported better-than-expected earnings this week, buoyed by a surprisingly strong performance from its North American division — which offset flat-to declining revenues from other geographic segments. 2024 guidance the company reported on the call was, ultimately, consistent with the notion that slowing investment in North America would cause those revenues to flatten, but more positively the company did suggest that modest growth in international could emerge by year-end. The offsetting strength or weakness of various business segments and geographic exposures, particularly for a mature business such as oil services, suggests the range-bound price action that Halliburton's share price has experienced for the past two years could continue. The stock has bounced around between roughly $23 and $43 share. Currently, the company is trading about 12x earnings, which certainly looks cheap compared to the S & P 500, but is pretty consistent with the company's own recent historic multiples, the relative “cheapness” attributable to the aforementioned geographic exposure concentration and the cyclical nature of the business. With a comfortable cash position and solid anticipated free cash flow of nearly $2.4 billion for 2024, Halliburton represents an interesting candidate for overwriting either in the form of selling cash covered puts for those who do not own the shares, or selling covered calls for those who do. Mature, investment-grade companies trading at modest multiples often make the best overwriting candidates as they are less likely to make substantial upside moves on unanticipated growth, or plummet due to sudden business impairments. Consequently, if one owns Halliburton shares, consider writing upside calls, particularly now that the company has released earnings. The May 24 $41 strike calls would collect about 40 cents, approximately 1% of the current stock price in four weeks while still offering more than 7% upside capital appreciation potential. Don't own the shares? One can sell cash-covered downside puts, collecting the premium and, if the shares decline the worst case is that one would purchase the shares at a discount to the current stock price. In that case one might consider selling the May 24 $37 strike put would collect about 58 cents per share, generating a standstill yield of approximately 1.5%. If shares decline and one is assigned the effective purchase price would be $36.42, at which point one could then look to sell upside calls. DISCLOSURES: None THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.