Chesapeake Energy Corporation (CHK) Calls Popular Amid Downtrend

Traders placed long-term bets on Chesapeake Energy Corporation (CHK) today

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Published on Mar 9, 2015 at 2:49 PM
Updated on Apr 20, 2015 at 5:32 PM

Chesapeake Energy Corporation (NYSE:CHK) is extending its recent downtrend today, off 4.1% at $14.55, after earlier touching a two-year low of $14.34. The shares have now dropped close to 26% in 2015, leading speculators to prefer puts over calls. Specifically, the stock's Schaeffer's put/call open interest ratio (SOIR) comes in at 1.14, in the 87th percentile of its annual range, indicating near-term options traders have targeted puts over calls by a wider-than-usual margin. Today, however, CHK's speculators have taken a longer-term approach and displayed a preference for calls, with the contracts crossing at twice the normal intraday rate and nearly doubling puts.

Looking at the data shows buy-to-open activity at the January 2016 20-strike call, with traders betting on (or hedging against) the shares making their way back above the round-number $20 mark by options expire next January. Delta on the contracts stands at 0.25, meaning they have a roughly 1-in-4 chance of finishing in the money at expiration. CHK traded above $20 as recently as Feb. 24, prior to a post-earnings bear gap.

Shifting gears, many analysts are skeptical of Chesapeake Energy Corporation (NYSE:CHK). Thirteen of 19 covering brokerage firms rate the shares a "hold" or worse. However, the equity's consensus 12-month price target of $20.59 stands at a 41.5% premium to CHK's current price, meaning future price-target cuts could be forthcoming.


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