Put Volume Pops as Chesapeake Energy Bounces

Chesapeake Energy Corporation (CHK) puts are trading at four times the average intraday pace

Apr 2, 2015 at 2:19 PM
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Chesapeake Energy Corporation (NYSE:CHK) is up 1.3% this afternoon at $14.53, amid speculation Iran has reached at tentative nuclear agreement with world leaders. This just extends yesterday's positive price action, which came in the wake of a big show of faith by the firm's chairman. In the equity's options pits, meanwhile, puts are crossing the tape at four times the expected intraday rate, and are outpacing calls by a nearly 3-to-1 margin.

Drilling down, CHK's January 2016 15-strike put has seen the most action, with 17,919 contracts on the tape. Volume outstrips open interest here, making it safe to assume new positions are being opened; however, it's unclear as to whether the contracts are being bought or sold. Elsewhere, it appears more traditional buy-to-open activity may be occurring in the front-month and June-dated series, as speculators bet on a retreat over the next two months.

Widening the sentiment scope reveals CHK's Schaeffer's put/call open interest ratio (SOIR) of 0.81 ranks in the 80th annual percentile, meaning short-term speculators are more put-heavy than usual. Elsewhere, short sellers upped the ante in the latest reporting period, and short interest now accounts for a lofty 17% of the equity's available float.

This bearish positioning by short sellers isn't too surprising, given the equity's longer-term downtrend. Since hitting an annual high of $29.92 in early July, shares of CHK have surrendered more than half of their value. More recently, Chesapeake Energy Corporation (NYSE:CHK) has lagged the broader S&P 500 Index (SPX) by nearly 31 percentage points over the past two months.

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