Price Forecast:

Bullish Case: Optimism stems from Valero's strong institutional backing and expected growth from renewable diesel initiatives, which could propel stock appreciation. Additionally, current mean reversion patterns support a bullish outlook.

Bearish Case: Concerns arise from high operational costs and bearish sentiment indicated by elevated put option volumes. The market's implied volatility suggests caution, potentially signaling a downward price adjustment for VLO.

Potential Outcomes:

1) 35% chance of price increase driven by positive renewable diesel growth;

2) 45% chance of neutral performance with mean reversion;

3) 20% chance of downturn due to high operational costs and bearish sentiment.

Trading Oracle: Implement a bull put spread strategy, selling $135 puts and buying $130 puts, capitalizing on VLO's potential upside with an 80% probability of profit. Focus on short-term expiries to maximize theta decay while mitigating risk.

November 15, 2024