Gulf uncertainty is creating ‘win, win’ strategy with Chevron and other oil majors

With options premiums still elevated due to the military conflict in the Gulf, selling puts on an energy major posting record free cash flow offers a rare combination: high probability, real yield, and a worst-case scenario you can live with. Chevron trades for less than 14 times forward price-to-earnings, generated ~$18 billion-plus in free cash flow in the most recently reported quarter, and ~14% annualized return on a trade with a high probability of profit.Chevron's closing stock price today is roughly where it was trading in late 2022/early 2023, despite the company's better operating results and arguably better outlook. The thesis doesn't require prices to remain this high, and we certainly hope they don't. However, based on current indicators, both oil prices and crack spreads are likely to stay elevated, resulting in record free cash flow, a forward multiple below 14 times earnings. The company reported that the $1.5 billion in run-rate synergies from the Hess acquisition are being realized faster than management guided. Stock Chart IconStock chart iconChevron, 5 yearsThe biggest knock on the story, one I appreciate well as a resident of the state, is outsized exposure to C...