Editor’s Note: Jim’s article below explores how to profit from the war-driven volatility in energy stocks through options. For readers who prefer a lower-risk approach to the same energy disruption, Robert Rapier’s essential-service portfolios in Utility Forecaster carry less than half the market’s volatility while delivering consistent income through the crisis. See his current Best Buys list.

Last week, I explained how I doubled my money on an options trade last month involving Delta Air Lines (NYSE: DAL). In my business, that’s what is known as a “two bagger.”

Long story short, I bought a call option on DAL shortly before the company was scheduled to release its quarterly results at about the same time an end to the war in Iran appeared to be in sight. A call option increases in value when the price of the underlying security goes up.

I said then, “the war in Iran is an options trader’s paradise.” That’s because stock prices can quickly change direction, greatly increasing (or decreasing) the prices of associated options in the process.

I made a similar bet last week. Although the war is not over and the Strait of Hormuz has not yet reopened, Wall Street is behaving as if that is a foregone conclusion.

For that reason, natural gas producers are taking a hit on the assumption that oil prices will revert to pre-war levels, thereby decreasing demand for natural gas while reducing the price at which it can be sold at the same time.

Expanding Horizons

The trade I made last week involved natural gas producer Expand Energy (NSDQ: EXE), a smallish ($23 billion market cap) independent natural gas producer headquartered in Oklahoma City. The company formerly known as Chesapeake Energy has production operations in Pennsylvania, Ohio, West Virginia, Louisiana, and Texas.

Until a few weeks ago, EXE was rising along with the rest of the energy sector, trading above $113 a share on March 27. That day, Mad Money host Jim Cramer expressed a preference for Cheniere Energy as a natural gas play, sending EXE into a tailspin that drove its share price below $96 last week.

Wall Street is concerned that when the Strait of Hormuz reopens, oil prices will revert to pre-war levels. The fear is that lower oil prices will suppress demand for natural gas and limit the price at which it can be sold. That may be true, but Expand Energy was doing quite well in that environment as demonstrated by its fiscal 2026 Q4 and full year results.

Those numbers included a 150 percent increase in net cash provided by operating activities during the fourth quarter, while diluted earnings per share rose from a loss of $1.72 the previous year to a gain of $2.30 in 2025. However, the company’s guidance for this year was focused more on cost control than growth, which is one reason why the stock went into a tailspin.

Mean Reversion

We’ll get a better idea of how this year is shaping when the company releases its fiscal 2026 Q1 results on April 28. Those numbers will be skewed by the Iran war which may influence the company to revise its outlook for this year to focus equally on growth and cost control. If so, then the stock could quickly rebound to its pre-war levels.

Even if that doesn’t happen, Expand Energy is now fundamentally undervalued and oversold from a technical perspective. At its current share price, EXE is trading at 10 times forward earnings while its relative strength index (RSI) of 32 suggests that the stock is close to bottoming out and should soon reverse direction.

A simple reversion to the mean, in this case its 50-day moving average share price around $105, would be sufficient to justifying buying a call option on EXE. For example, last week while EXE was trading near $96, the call option that expires on May 15 at the $95 strike price could be bought for $4.50.

For the intrinsic value of that trade to be greater than the cost of opening it, EXE must rise above $99.50 over the next three weeks. To be a two-bagger, EXE must make to $104 by the time this option expires.

That is 8 percent above where it was trading last week, which is a big move in a short period of time under ordinary conditions. However, conditions are anything but ordinary and a move of that magnitude is well within reach.

To be clear, that is not the trade I made last week for my PF Pro readers. Instead, I suggested using a call option that does not expire until next January. That way, there is plenty of time for Expand Energy to execute its gameplan this year and for Wall Street to objectively evaluate those results.

However you choose to play an end to the war in Iran, the key is to have a clear idea of why you are making the trade and a rational basis for determining how much risk you are willing to accept in exchange for the return you are seeking. In my case, I think another two-bagger is within reach before this window of opportunity shuts for good.

My two-bagger thesis highlights something important: the Iran war has created a rare window where energy stocks are mispriced in both directions. Options traders can exploit the short-term swings, but for investors who want exposure to the same energy disruption without timing risk, my colleague Robert Rapier takes a fundamentally different approach in Utility Forecaster. His essential-service portfolios own the companies that generate electricity, move natural gas, and power the grid — businesses that benefit from the structural demand shift regardless of when the Strait of Hormuz reopens. While EXE needs to hit $104 for my trade to double, Robert’s holdings keep paying dividends either way. See Robert’s crisis-proof portfolio picks →