The Signal

Something happened in the OXY options market last week that does not show up in most stock headlines.

Options volume in Occidental Petroleum surged to 258,104 contracts in a single session — 5.4 times its 30-day average, and the highest single-day activity recorded in three months. The put/call volume ratio came in at 0.07. That is not a typo. For every one put traded, roughly fourteen calls changed hands. That is not a hedging pattern. That is not a routine covered call overlay from long-term holders. That is a directional, high-conviction expression of bullishness compressed into one trading day.

The top contract by volume-to-open-interest ratio was the July 17 $56 call, which printed a Vol/OI ratio of 144.57. Occidental had a total of eleven unusually active contracts that session, with six of them expiring this coming Friday. Four of those six were out-of-the-money calls ranging from $54 to $57, all priced between 0.8% and 2.2% of the stock’s closing price. Short-dated, relatively cheap, and stacked on the call side.

Options markets do not always tell you a stock is about to move. But they do reveal what participants are thinking — and in OXY’s case this week, the thinking is clearly skewed toward the upside.

Why Sophisticated Participants Are Paying Attention

There are three things converging on OXY right now, and none of them exist in isolation.

First, crude oil. WTI climbed back above $74 per barrel on Monday, with Brent touching roughly $79, as the U.S. and Iran continued exchanging missile strikes tied to ongoing tensions in the Strait of Hormuz. Iran declared the waterway closed “until further notice” — a claim U.S. Central Command rejected, but one that markets are taking seriously regardless. The Strait handles approximately 20% of the world’s oil and gas trade, and even partial disruption carries real weight for price discovery.

This is not the first time Hormuz has driven oil volatility in 2026. The strait was effectively closed from late February until a U.S.-Iran memorandum of understanding in June temporarily reopened it. Brent averaged $85 per barrel in June before prices collapsed below $70 as supplies returned. Since then, the ceasefire has frayed. Renewed exchanges between Washington and Tehran — including a U.S. strike on Sunday, the fourth in a week — have reversed a portion of those losses and reintroduced a supply risk premium.

For Occidental specifically, that matters more than it does for most peers.

Second, the Evercore double-upgrade. On July 8, Evercore ISI analyst Stephen Richardson moved OXY from Underperform to Outperform in a single step, raising his price target to $65 from $58. His thesis did not rest on a spike in oil prices. The case was built on balance sheet transformation and capital efficiency. Occidental has reduced its principal debt to $13.3 billion, down $7.5 billion from peak levels, with a near-term target of $10 billion. The firm projects free cash flow per share growing approximately 8% annually through 2030 at a flat $75 WTI price. Richardson argued the market had not yet fully priced in the durability of those efficiency gains.

The day that report landed, OXY shares jumped roughly 4%, while ExxonMobil slipped and Chevron gained only modestly. The upgrade triggered options flow almost immediately.

Third, the Q1 2026 earnings beat. Occidental posted adjusted EPS of $1.06 for the first quarter, against analyst expectations of $0.59 — an 80% beat. Free cash flow before working capital came in at approximately $1.7 billion. The company guided to more than $1.2 billion in incremental free cash flow versus 2025 for the full year, and domestic lease operating expense came in at $7.85 per barrel, roughly 5% better than guidance. That is not a company struggling with execution.

The Company Behind the Signal

Occidental Petroleum is one of the largest independent oil and gas producers in the United States, with upstream operations across the Permian Basin, Rockies, Gulf of America, the Middle East, and North Africa. It operates through Oil and Gas, Midstream and Marketing, and Chemical segments — though the chemical business (OxyChem) is in the process of being sold, which has meaningfully simplified the story for equity investors.

The Q2 2026 preliminary data, released via 8-K on July 10, showed average realized worldwide oil prices of $96.78 per barrel for the quarter, against WTI benchmark of $92.79 per barrel and Brent of $97.06 per barrel. U.S. oil realizations came in at $96.93 per barrel. Crude oil collar settlements reduced Q2 operating cash flow by $156 million — a headwind worth noting — but the underlying realized price environment was strong relative to 2025 comparisons.

For context: in Q2 2025, Occidental reported adjusted EPS of $0.39 per share against an average WTI price of $63.74 per barrel and a worldwide realized crude price of $63.76. In Q2 2026, WTI averaged $92.79. The year-over-year commodity tailwind is substantial. Consensus analyst estimates for Q2 2026 adjusted EPS sit around $1.82-$1.86. Full year EPS growth estimates from some forecasters imply a near-400% improvement over 2025 — a figure that reflects both the oil price gap and the now-materially lower interest expense from debt reduction.

The next scheduled earnings event is August 5, 2026.

Berkshire Hathaway owns 26.6% of Occidental common stock and holds $8.3 billion in preferred shares carrying an 8% coupon, with redemption possible no earlier than August 2029. That preferred structure has historically weighed on the common equity’s oil price leverage. As Evercore noted, that overhang remains a structural consideration. But it has not changed, and the market appears to have largely accommodated it.

The analyst rating distribution is worth keeping in mind: as of early July, the consensus is Hold, with roughly 14 to 15 Hold ratings against 8 to 9 Buys. Evercore’s upgrade goes against that grain.

Market Expectations and What the Options Market Is Pricing

Here is where the options market gets genuinely interesting.

The concentration of activity in the July 17 expiration — contracts expiring in four days from the time of the heavy flow — suggests this was not long-horizon positioning. These are not LEAPS. Traders were not building 12-month views. They were expressing a short-window directional opinion, likely tied to crude oil volatility, continued geopolitical headlines, or simply riding momentum from the Evercore event.

Short-dated OTM calls priced at 0.8% to 2.2% of spot are inexpensive by definition. They expire worthless if the stock does not move. They pay well if it does. That risk profile is consistent with speculation — not hedging. Hedgers buy puts. They do not sweep call strikes at 144x open interest on a Tuesday afternoon.

The broader call-to-put ratio of roughly 14:1 on a single session is directionally meaningful. That kind of skew tends to reflect either informed positioning ahead of expected price movement, or a momentum pile-on after a catalyst (the upgrade) that traders believe has not yet been fully absorbed by the stock.

What the options market appears to be pricing: a continued move higher in OXY into and through the July 17 expiration, with further upside potential through the August 5 earnings date.

The question worth asking is whether that expectation is reasonable.

OXY closed around $52.89 as of July 10, against a 52-week range from a low of $38.80 last December to a 2026 high of $67 in late March. The stock is up more than 30% year-to-date, driven by higher oil prices. The Evercore target of $65 implies roughly 23% additional upside from the current price. But the stock has already been to $67 and failed to hold it. The target is not breaking new ground — it is reclaiming old territory.

At the same time, the macro environment for crude is genuinely volatile. WTI was below $70 on July 1. It has since rebounded toward $74 to $78 on renewed Hormuz tensions. The June 18 MOU between the U.S. and Iran was supposed to settle things. It has not. The 60-day window on that framework closes in mid-August, which overlaps almost exactly with Occidental’s earnings call. That creates a convergence of catalysts — crude price uncertainty, geopolitical resolution or escalation, and a quarterly earnings event — all landing in the same three-to-four week window.

Strategic Considerations

Given the options activity pattern and the macro backdrop, there are several ways to think about positioning — depending entirely on a trader’s view of OXY’s near-term direction and their tolerance for uncertainty.

Bull Case: Defined-Risk Call Structure

For traders who believe OXY continues higher into earnings and that crude holds above $72 WTI, a defined-risk bullish position would be a bull call spread — buying a call at or near the money and selling a higher-strike call to reduce the cost of the position.

A structure targeting the August expiration (capturing the August 5 earnings date) allows participation in a potential move while defining maximum loss to the net debit paid. The advantage here is avoiding the near-expiration time decay pressure that plagued the July 17 contracts bought earlier this week. Those positions are already burning off rapidly.

Key conditions that support this view:

• WTI sustaining above $70-$72 into the earnings date
• Hornuz tensions continuing to inject a supply risk premium into oil prices
• Q2 EPS coming in near or above the $1.82-$1.86 consensus estimate
• Continued momentum from the Evercore upgrade being absorbed by a broader set of investors

The risk: OXY is highly sensitive to oil prices. If the U.S.-Iran framework stabilizes and Hormuz reopens fully, crude could retrace toward $65-$70, and OXY’s stock has historically tracked oil prices closely. A commodity reversal before earnings could erase recent gains quickly. Evercore itself acknowledged that OXY’s free cash flow growth rate trails Diamondback Energy, ConocoPhillips, and Chevron.

Bear Case: Put Spread or Staying Out

The bear case is less about Occidental’s operations and more about the macro environment. Oil prices fell sharply in late June when the Hormuz MOU appeared to hold. The base case for many commodity analysts is WTI in the low $60s to mid-$70s through the rest of 2026, with Citi flagging downside toward $60 if the final U.S.-Iran deal lands cleanly and OPEC continues adding barrels into 2027. OPEC has already approved its fifth consecutive monthly production increase.

If that scenario plays out, OXY’s Q3 revenue and free cash flow would be materially lower than Q2, and the stock would likely give back a significant portion of its year-to-date gains.

For traders who lean toward this outcome but want defined risk, a put debit spread targeting a pullback to the $45-$48 range (roughly the stock’s pre-rally level from earlier in the year) with August or September expiration offers asymmetric downside exposure without naked short risk.

Worth noting: the current put/call ratio of 0.07-0.17 suggests virtually no one in the options market is currently paying for downside protection. Contrarian thinkers take note — when the put/call ratio reaches extremes in either direction, the crowd is rarely right at the exact turning point.

Neutral/Income Case: Covered Call or Short Strangle

For existing OXY shareholders who are comfortable with their position but want to generate premium income from the elevated volatility environment, selling covered calls against shares already held is a straightforward approach. The July 17 $57 call, for example, was trading at approximately $0.37 at the time of heavy volume, against a stock price around $53.59 — representing a 0.70% return in nine days or roughly 28% annualized on the premium alone, even before accounting for any capital appreciation.

The tradeoff: if the stock climbs above $57 by Friday, the shares get called away. For a trader who entered at the December 52-week low near $38.80, that is still an enormous realized gain. For someone who bought at current prices, the position caps upside in exchange for immediate premium income.

A cash-secured put at a strike of $48 or $50 could also appeal to investors who want to accumulate OXY shares at a lower cost basis while collecting premium — though earnings risk on August 5 would need to be factored in for any put sold through that date.

Risk Analysis

There are several risks that could invalidate the bullish positioning seen in this week’s options flow.

• Geopolitical resolution: A durable U.S.-Iran settlement or formal ceasefire agreement would remove the supply-risk premium from crude rapidly and send oil prices lower. This is the single largest near-term risk to OXY’s stock price.
• OPEC+ production increases: OPEC approved its fifth consecutive monthly production increase for August. If supply outpaces demand recovery, the oil glut scenario becomes a real headwind for the sector.
• Berkshire preferred overhang: The $8.3 billion preferred stock held by Berkshire Hathaway, carrying an 8% coupon and redeemable no earlier than August 2029, creates a persistent drag on the common equity’s ability to fully leverage oil price upside. It is a structural feature, not a temporary one.
• Q2 earnings miss: Crude oil collar settlements negatively impacted Q2 operating cash flow by $156 million. If other cost items surprise to the downside, even a strong revenue quarter could disappoint on the free cash flow line, which has become the primary metric institutional holders track.
• Implied volatility expansion and contraction: With earnings approaching on August 5, implied volatility in OXY options is likely to rise in the days leading up to the report and then compress sharply after. Traders who bought calls for the catalyst may find that even a positive earnings reaction does not fully compensate for the volatility crush. This is the options version of buying the rumor and selling the news — except the “selling” happens automatically through IV compression.

Forward Outlook

The options market’s message in OXY this week is fairly clear: traders expect more upside, the put/call skew is at an extreme, and the short-dated call concentration reflects urgency rather than long-horizon conviction.

What matters from here is whether crude oil prices hold the recent gains. The Strait of Hormuz situation is genuinely unresolved. The 60-day window on the June MOU expires in mid-August. Tehran’s declaration that the strait is closed — even if contested by Western naval forces — has restored a risk premium to oil that was almost entirely absent as recently as July 1.

Occidental is uniquely levered to this environment. Among U.S. exploration and production majors, it carries the highest oil price beta. That means it outperforms when crude rises and underperforms when crude falls — often more dramatically than peers like Chevron or ConocoPhillips, whose more diversified cash flow streams provide some buffer.

The August 5 earnings report is the next hard catalyst. Analyst consensus sits around $1.82-$1.86 for Q2 adjusted EPS. Given the Q2 realized oil price of $96.78 per barrel against Q2 2025’s $63.76, the year-over-year comparison is favorable. The question is whether the collar drag, natural gas price weakness (domestic gas realizations were negative in Q2), and share count dilution from the OxyChem sale process create unexpected offsets.

Slight tangent, but worth keeping in mind: the Evercore upgrade explicitly noted that OXY’s FCF growth through 2030 trails Diamondback, ConocoPhillips, and Chevron even under their bullish assumptions. The bull case here is not about OXY being the best oil company. It is about a company that was priced too pessimistically for too long, and that has meaningfully cleaned up its balance sheet at exactly the moment crude prices are recovering.

Whether that recovery holds through August 5 is the only question that matters right now.

What to Watch

• Strait of Hormuz developments (daily): Any movement toward a durable ceasefire or formal reopening agreement would be bearish for crude and, by extension, OXY. Continued escalation supports the current options positioning.
• WTI price relative to $70: That level has acted as a pivot. Sustained trading above $70 supports the bull case; a break below it reintroduces 2025-style pressure on energy names.
• Open interest changes in August expiration OXY calls: Watch for whether the bullish positioning that showed up in July contracts gets rolled into August. A visible rotation into August calls ahead of the earnings date would confirm that traders are positioning for a sustained move, not just a short-term momentum play.
• Q2 earnings on August 5: The key items to track are adjusted EPS relative to the $1.82-$1.86 consensus, free cash flow before working capital, and any update on the OxyChem sale timeline and debt reduction progress.
• OPEC+ production decisions: The fifth consecutive monthly production increase for August is already priced in. If OPEC signals acceleration beyond that schedule, crude price estimates for Q3 and Q4 would shift downward, which would directly affect how options traders price OXY into year-end.
• U.S.-Iran MOU 60-day window: That framework expires in mid-August. Any signs of breakdown or formal collapse would immediately reprice crude higher and likely send OXY call implied volatility spiking. Conversely, a formalized peace deal is the single largest negative catalyst for crude-price-sensitive names in the energy sector right now.

The options market made its opinion known last week. Whether the stock confirms it is another matter entirely.

— Options Trading Report