With elevated oil and gas prices due to the U.S.-Iran conflict, ConocoPhillips (COP) stock is up again. That has also pushed COP put premiums higher, making them attractive to put option short sellers. This article will show how this works.
COP closed up slightly on Friday, July 24, at $120.26 per share, up from a recent trough price of $103.22 on July 1. However, it's still down from an April 29 peak of $128.25.
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COP stock - last 3 months - Barchart - July 24, 2026 COP has tracked the recent spike in the WTI Sept. '26 futures price (CLU26) as shown in the Barchart chart below.
WTI Sept. '26 futures - CLM26 - Barchart - July 25, 2026 It's up from a recent low of $68.51 on July 1 to $92.19 on July 23. As of Saturday, July 25, it was at $89.31.
Lower Production But Higher Revenue Forecasts
ConocoPhillips will benefit from these higher oil and gas prices. But for most of Q2, prices were lower, as may be seen when Conoco is set to release earnings on Aug. 6.
On July 3, it guided for slightly lower oil and gas production: 2.185 to 2.215 million barrels of oil equivalent per day (MMBOED), compared to 2.309 in Q1 and 2.32 MMBOED in Q4 2025.
Moreover, for all of 2026, it's guiding for higher production: 2.295 - 2.325 MMBOED. That includes the higher Q1 production, but may also include higher forecasts for Q3/Q4.
However, analysts are forecasting higher Q2 revenue compared to Q1, based on Seeking Alpha's survey:
$19.83 billion (Q2) est. vs. $16.05 billion in Q1 2026
Higher Volatility and Option Premiums
Barchart reports that the implied volatility (IV) is now 36.58% (+1.58%), which is higher than its historical volatility of 31.48%. This volatility has led to higher put option prices.
As a result, investors can earn 1.85% to 2.54% in one month out-of-the-money (OTM) expiring Aug. 28. This is for COP short-put plays for strike prices that are between 7.7% and 5.2% lower than Friday's close.
For example, the $111.00 strike price put expiring Aug. 28 (32 days to expiry), i.e., 7.70% out-of-the-money (OTM), has a midpoint premium of $2.05.
That means a short-seller who secures $11,100 with their broker can earn $205 after entering an order to “Sell to Open” this put contract. That works out to a 1.8468% one-month yield.
Similarly, shorting the $114.00 put provides $2.90, or 2.5439% (i.e., $290 for $11,400 posted as collateral) over the next month.
COP puts expiring Aug. 28 - Barchart - As of July 24, 2026 These are very attractive short-put yields for value investors with low risk. For example, the delta ratio for the $111.00 strike price put play is only 23%. That is very low for a 7.7% lower strike price.
The $114.00 put play has a higher risk - 30%, based on the delta ratio- but the breakeven point even if COP falls to $114 is acceptable:
$114.00 - $2.90 = $111.10, i.e., 7.6% below $120.26, as of Friday, July 24
The breakeven is also significantly below analysts' price targets (PTs). For example, Yahoo! Finance shows that the average PT of 25 analysts is $140.84. That implies that at the $111.10 breakeven point, the potential upside is +26.8%.
And note this. If an investor could repeat this one-month 2.544% play each month for 10 months, the expected return is 25.44%, almost equal to the PT return from analysts' price targets (26.8%).
The bottom line is that shorting Conoco put options provides good potential returns for patient value investors.
On the date of publication, Mark R. Hake, CFA did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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