Price Forecast:

Bullish Case: Valero Energy could benefit from robust renewable diesel demand, coupled with an anticipated stabilization in refining margins, potentially driving shares above current price levels.

Bearish Case: High operational costs and bearish sentiment reflected in the options market could undermine price stability, threatening a downward trend for Valero Energy shares.

Potential Outcomes:

1. 40% chance of price recovery fueled by increasing renewable diesel sales.
2. 35% chance of volatility due to macroeconomic factors impacting refining margins.
3. 25% chance of continued bearish pressure from high operational costs.

Trading Oracle: Consider a short-dated bull put spread by selling $125 puts and buying $120 puts. This reflects a bullish outlook ahead of expected market stabilization, offering a high probability of profit (64%) and a potentially attractive return structure with volatility backing.

December 18, 2024