LyondellBasell (LYB) , the 3rd-best-performing stock in the Russell 1000 on Wednesday, is a cyclical name that may be signaling a bearish-to-bullish reversal. The stock was punished through 2025 as the global chemicals chain wrestled with weak demand and ongoing overcapacity — especially in Europe and Asia — driving compressed margins and investor skepticism. In fact, the stock has declined roughly 55% since mid-May 2022, a performance that ranks it in the bottom decile of the large-cap index’s total returns since then, at nearly -41% (total returns are higher than the change in the stock price due to dividends). That pessimism has also created the preconditions for a reversal: low expectations, cautious positioning and down sharply. The bullish case starts with the price move itself. The stock has just closed above the 150-day moving average for the first time in nearly 15 months. Is this sign of life on an otherwise weak day an indication that investors are paying attention to management action on structurally challenged assets and progressing divestitures? Perhaps, but while the company’s U.S.-centered feedstock is an advantage — low oil prices are a benefit by reducing input costs — demand remains slack. Street consensus of about $29.5 billion in revenues in FY2026 represents some stabilization from steep declines since peak revenues in 2022, but not yet a return to growth. Forecasts of $3.32 per share in adjusted earnings are 82% lower than peak EPS in FY2021. However, if the company meets that forecast, it would represent a huge improvement over FY2025, with nearly 48% growth year over year. This would also mean a modest forward price-to-earnings multiple of 15.7. LYB’s dividend yield has risen to the top of the S & P 500, reflecting doubt about sustainability at over 10% annualized. If operating results stabilize, income-focused buyers may step in. Short-sellers — the current short interest is just over 8% of the float — may look to take profits and cover. In fact, this may help explain the price action we have just seen. None of this eliminates the risk. A 10% dividend yield suggests many investors believe that the dividend isn’t sustainable. Chemicals are a cyclical industry, and a dividend reset remains a non-trivial possibility. But if you’re looking for a bearish-to-bullish reversal setup, LYB offers a combination of “low bar” expectations, tangible portfolio actions and operating leverage to any normalization in spreads. If dividends are to reset or come down, a call spread risk reversal may be a way to play the bounce out a bit further. It’s a bullish strategy, but as it does not involve owning the stock, any increase in expectations that the dividend may be cut can actually increase the value of calls and decrease the value of puts, all else equal — and a call spread risk reversal is short a put and long a call spread. A March 47.5/52.5 60 call spread risk reversal participates for roughly 15% to the upside from here, while assuming the risk of potentially purchasing the stock at the short put strike, $47.5, approximately an 8.5% discount, and about where the stock was trading late last week. It would be nice to see meaningful operational improvements, not just consensus that revenues are finally starting to stabilize. However, sometimes, for a trade, we don’t have that luxury, and momentum may begin to shift even before we fully realize why it should. DISCLOSURES: None. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
