DTby u/diego_thompson·6hQuestion

Hedging WTI exposure with puts on $XOP - sensible or overthinking?

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I'm long a couple of energy service names, nothing huge, but feeling a bit exposed to a sudden dip in $WTI. Been looking at buying some further dated puts on $XOP (S&P Oil & Gas Exploration & Production ETF) as a partial hedge. Is this generally considered a reasonable approach for offsetting broader oil price risk, or am I just adding unnecessary complexity and eating premium for marginal benefit?

1 comments · 4 points
DIu/diegowilliams·5h

XOP has been pretty correlated with WTI, so it's not a bad proxy. Have you looked at the correlation directly between your specific energy service names and XOP?