Short-Term Speculators Swarm Chesapeake Energy Corp

Weekly 5/22 options are popular among Chesapeake Energy Corporation (NYSE:CHK) and Transocean LTD (NYSE:RIG) traders

by Alex Eppstein

Published on May 19, 2015 at 1:59 PM
Updated on Jun 24, 2020 at 10:16 AM

An ongoing sell-off in crude oil is weighing on a number of energy stocks today, including Chesapeake Energy Corporation (NYSE:CHK) and Transocean LTD (NYSE:RIG). In turn, short-term options traders are wagering on the equities' end-of-week trajectory.

Ahead of this Friday's annual shareholder meeting, CHK is seeing calls exchanged at a slightly accelerated intraday clip. Most active are the weekly 5/22 15 and 15.50 strikes, which Trade-Alert indicates are being bought to open.

Apparently, these bullish bettors aren't scared off by CHK's 2.1% loss this afternoon to trade at $14.58 -- or, from a longer-term perspective, its 25% year-to-date deficit. By purchasing the out-of-the-money calls, the traders expect the stock to topple the respective strikes by this Friday's close, when the weekly series expires.

Shifting our attention to RIG, puts are the options of choice today, doubling the number of calls on the tape. However, not all of these put transactions are of the bearish variety. The largest block to cross involved 5,000 weekly 5/22 18-strike puts, and it appears the lot was sold to open.

In other words, the put writer expects RIG's bleeding will stop. The shares have plunged 5.5% today to hover near $19.05 -- wiping out a majority of their year-to-date gains -- and by selling the puts, the trader anticipates $18 will act as a short-term bottom for the shares.

This confidence in Chesapeake Energy Corporation (NYSE:CHK) and Transocean LTD (NYSE:RIG) isn't necessarily reflected elsewhere on the Street. For instance, short sellers have had a field day on both stocks, as 23.1% of CHK's float and 29.4% of RIG's float are dedicated to short interest.

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