EOG Resources, Inc. (EOG), Trending Stock Report

EOG Resources, Inc. (EOG) appeared on our list of compressed stocks this morning. EOG is an oil and natural gas energy company that has a long history of making big moves after a compression signal. Just look at the charts below to see how the stock behaved after previous compression signals.

From an options trader’s perspective, the options for September 20^th expiration are substantially undervalued if the stock continues to behave the way it has in the past. This means we can buy options on EOG at a significant discount to their value.

This Volatility Term Structure for EOG shows us the implied volatility for the at-the-money options for each expiration. To learn more about Volatility Term Structure, click here. The volatilities at each term are pretty flat after the scheduled earnings report at the end of October. We are interested in lower volatility term at September 20^th expiration because historically, it gives us enough time for the stock to make a profitable move after a compression signal at a relatively low cost.

This MDM graph compares the modeled expectations of current options prices (the orange line) to the actual movement of EOG’s stock price over the past 4 years. This graph tells us that EOG makes large moves more frequently than modeled options prices expect. That is good news for option buyers.

This Volatility Cone shows the volatility expectations at each term (the yellow dots) and compares these expectations to the historical average (the blue line) along with the historical high and low values (the purple lines). To learn more about the Volatility Cone, click here. You can see that this graph shows that all terms are below the historical average. This confirms that EOG options are cheap relative to the historical average over the last 2 years.

EOG’s stock prices are compressed. The stock has a history of making big moves shortly after a compression signal and options are relatively inexpensive. This is an option buying opportunity.

To get the specific details and prices on today’s trade ideas, be sure to read today’s ODDS Online Daily Option Trade Idea.