Chevron Corp (CVX) stock closed at $224.99 on Friday, Oct. It has risen 10% since the end of September ($204.21). And CVX is also up 8.6% ($207.10) since my last Barchart article on Oct. 2, “Chevron Stock May Attract Value Investors, Especially If It Hikes the Dividend Next Year.”
I suggested investing a one-month put credit spread, which was attractive. That has worked well, and it makes sense to close this play out and reinvest in it again. This article will show how.
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CVX stock - last 3 months - Barchart - As of Oct. 16, 2026 CVX Price Targets Are Higher
Obviously, the CVX stock price gain is due to higher oil and gas prices. Moreover, analysts believe Chevron's outlook is even brighter over the next year.
As a result, their price targets have risen even in the last two weeks. For example, Yahoo! Finance's survey price target (PT) is up from $224.21 on Oct. 2 to $227.92 today, a rise of 1.65% in two weeks.
Similarly, Barchart's mean survey PT is up from $221.93 to $226.26 today.
The bottom line is that investors and analysts now believe that Chevron's value has risen as a result of higher oil and gas prices.
As a result, the value of the discussed put credit spread has declined dramatically, exactly what investors wanted.
Put Credit Spread Play Worked Out Well
In the Oct. 2 Barchart article, I discussed selling short the $195 put expiring Nov. 13 and buying long the $190 put. The short put credit was $318, and the long put cost $201, so the net put credit collected from this spread was $117.
From an investment standpoint, the advantage is that the collateral required was only $500 (i.e., ($195-190) x 100), so the net at-risk amount was just $383 ($500-117). As a result, the expected return (ER) was $117/$383, or 30.55%.
CVX puts expiring Nov. 13 - Barchart - As of Oct. 16, 2026 This has worked well. The Nov. 13 $195 strike price put is $0.44, and the $190 strike is at $0.42. So, the net put spread is now just $0.02, or $2.00.
That means the investment return is $117-$2 (after being closed out), or $115. That worked out to a net ROI of $115/$383, or 30% in just 2 weeks.
So, it makes sense to repeat this play in a further-out expiry period. For example, look at the Nov. 20 expiry period.
It shows that the $200 strike has a $1.08 premium ($108) and the $190 strike would cost $38 on the long side. So, the net put credit spread income is $70 for the next month.
The collateral required is $1,000 (i.e., ($195-$190) x 100), but the at-risk amount is $1,000-$ 70, or $930, so the expected return (ER) is $70/$930, or 7.53%.
That is significantly higher than the ER from a short-put play at the $200 strike price: $108/$20,000 = 0.54%.
However, the risk is that if CVX drops below $199.30 (i.e., $200-$0.70 net credit, i.e., -11.39%), the investor begins to lose money.
At $190, or -15.55% below Friday's close, the whole $1,000 collateral will be lost (i.e., a net loss of $930).
Nevertheless, the likelihood of even dropping to $200 is low. That's because the delta ratio is -0.10, implying a 90% chance of success with this play.
The bottom line is that investors doing a new CVX put credit spread have good odds here.
Nevertheless, there are risks worth considering, especially since the price of oil is volatile. This play is only for those willing to lose the full $930 per put contract.
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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