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Option Clips: Apple Inc. (AAPL), Facebook Inc (FB), and Chesapeake

Reviewing notable options activity on Apple Inc., Facebook Inc, and Chesapeake Energy Corporation

by 4/24/2014 1:37 PM
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Two equities generating post-earnings buzz on StockTwits today are tech kingpin Apple Inc. (NASDAQ:AAPL) and social networking titan Facebook Inc (NASDAQ:FB). Meanwhile, oil-and-gas concern Chesapeake Energy Corporation (NYSE:CHK) is popular in the options pits. Here's a look at how traders have been aligning their speculative bets today.

  • Apple Inc. (NASDAQ:AAPL) is dominating headlines today, after the firm reported solid quarterly earnings, upped its dividend and share buyback plan, announced a 7-for-1 stock split, and said it aims to triple the number of retail stores within the next two years. As a result, AAPL shares are 8.1% higher to flirt with $567.37, edging into the black for 2014. In the options arena, intraday volume is running at three times the norm, though calls are outnumbering their put rivals. Seven of the 10 most active strikes expire at tomorrow's close, and all have seen volume surpass open interest, hinting at eleventh-hour bets. Digging deeper, the weekly 4/25 565- and 570-strike calls are most popular, with speculators buying the contracts to open to gamble on more end-of-week upside for Apple Inc.

  • Facebook Inc (NASDAQ:FB) is also enjoying a post-earnings lift -- albeit more modestly -- with the shares up 1.2% at $62.11. Options volume is running at twice the intraday norm, though calls are outpacing puts by a near 2-to-1 margin. Most active is the weekly 4/25 65-strike call, where more than 27,100 contracts have traded, primarily at the ask price. Plus, volume has topped open interest at the soon-to-expire strike, hinting at fresh initiations. By purchasing the calls to open, the buyers expect FB to be sitting atop $65 at tomorrow's close, when the options expire.

  • Finally, Chesapeake Energy Corporation (NYSE:CHK) was last seen 1.2% higher at $29.35, after notching yet another new two-year high of $29.43 earlier in the session. What's more, options traders are rolling the dice on more upside for the shares, with call volume trading at 11 times the average intraday pace. Digging deeper, it appears one trader established a bull call spread at the October 35 and 40 strikes, where symmetrical blocks of 33,000 contracts changed hands. By initiating the spread for a net debit of $0.40 per pair of calls, the trader expects CHK to be sitting atop $35.40 (bought call strike plus net debit) -- in territory not charted in nearly three years -- by October options expiration. Risk is capped at the initial net debit, while his maximum profit potential stands at $4.60 (difference between strikes minus net debit) per pair of calls, no matter how far CHK should soar north of $40. Ahead of Chesapeake Energy Corporation's turn in the earnings spotlight on May 7, the stock's 30-day at-the-money implied volatility is up 4.8% at 34.9%, suggesting short-term options are also in demand.


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