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Option Brief: Chesapeake Energy Corporation (NYSE:CHK) rallied to a fresh two-year peak of $29.84 yesterday in the wake of its strong earnings report and upbeat cash-flow forecast, and finished the session at its loftiest close since October 2011. The positive price action had call players piling on, with the contracts trading at a 69% mark-up to the average daily pace, and outstripping puts by a more than 2-to-1 margin (although put volume did swell to two times what is typically seen).
The most active strike of the session was CHK's May 29 call, where 8,265 contracts changed hands. More than half of this volume occurred when a block of 4,633 contracts was exchanged closer to the ask price at $0.86, pointing to buyer-driven activity. Open interest rose the most of any strike overnight, making it safe to assume that new bullish positions were initiated. With CHK perched at $29.68, these front-month calls are currently in the money. Based on the initial cash outlay for the aforementioned lot, though, breakeven at next Friday's close -- when the options expire -- is $29.86, or the strike plus the premium paid.
Elsewhere, it appears another speculator chose to up the bullish ante on the heels of CHK's earnings-induced rise. Specifically, one sweep of 3,000 weekly 5/9 29-strike calls was sold for $0.49 apiece, while a symmetrical block of weekly 5/23 29.50-strike calls was bought for $0.70 each. Open interest translations confirm the closing and opening of positions at these respective strikes. Simply stated, this trader rolled her bullish position up and out, eyeing extended gains for Chesapeake Energy over the next two-plus weeks.
As touched upon, CHK has done well on the charts over the long term, up about 54% year-over-year. This underlying strength has been in full view recently, with the shares rising more than 22% from their March 20 low of $24.24. Plus, the equity took a strong bounce off its rising 20-day moving average on Wednesday, which helped CHK tack on 4.4%. In today's session, Chesapeake Energy Corporation (NYSE:CHK) is extending its upward momentum, thanks to a pair of bullish brokerage notes.