Most Active Options Update: Chesapeake Energy Corporation and Micron Technology, Inc.

Chesapeake Energy Corporation (CHK) and Micron Technology, Inc. (MU) call options have been active of late

Oct 19, 2015 at 11:54 AM
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The 20 stocks listed in the table below have attracted the highest total options volume during the past 10 trading days. Names highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. Two names of notable interest are oil-and-gas issue Chesapeake Energy Corporation (NYSE:CHK) and semiconductor concern Micron Technology, Inc. (NASDAQ:MU).


CHK is down 3.9% at $8.07, as commodity stocks sag in step with oil, which is taking it on the chin after lackluster growth data out of China. CHK has surrendered roughly 59% in 2015, with recent rebound attempts stalling in the $10 region, home to the equity's declining 20-week moving average.

During the past two weeks on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity has racked up a 10-day call/put volume ratio of 1.23 -- higher than 59% of all other readings from the past year. In other words, traders have bought to open CHK calls over puts at a slightly faster-than-usual clip lately.

The out-of-the-money January 2016 11-strike call saw the biggest open interest influx during the last 10 sessions, with almost 20,000 contracts added. Traders who bought the calls to open are either gambling on a notable rebound north of $11 by January options expiration, or they're hedging their short positions

In fact, short interest represents more than one-third of CHK's total available float. At the security's average pace of trading, it would take nearly 13 sessions to buy back all of these bearish bets. By purchasing out-of-the-money calls, shorts could limit risk on a major surge on the charts.

Analysts are also in the bearish camp -- no surprise, considering Chesapeake Energy Corporation's (NYSE:CHK) recent performance. Just four brokerage firms offer up "buy" or better endorsements, compared to 10 "holds" and six "sell" or worse ratings. What's more, SunTrust Robinson this morning trimmed its price target on CHK to $12 from $14.

Meanwhile, MU is up 2.6% at $18.99, and is on pace to end the week atop its 20-week moving average for the first time since early January. While the shares are still down more than 45% in 2015, the equity sports a month-to-date gain of 27.2%, and last week emerged as a possible suitor for SanDisk Corporation (NASDAQ:SNDK). Meanwhile, late Friday, CEO Mark Durcan requested a temporary 50% salary cut, in line with recent cost-cutting efforts (subscription required).

On the ISE, CBOE, and PHLX, MU's 10-day put/call volume ratio stands at 0.55 -- above three-fourths of all readings from the past year. However, this ratio has been on the decline since the aforementioned SNDK buzz, with the now-expired October 17.50-strike call seeing a surge in open interest during the past two weeks -- up nearly 19,000 contracts, the most of any strike. The calls expired 1 point in the money on Friday, as MU settled the week at $18.50.

Today, Micron Technology, Inc. (NASDAQ:MU) calls have outnumbered puts by a margin of more than 2-to-1. It looks like short-term bulls are buying to open the weekly 10/23 19-strike call -- the most popular so far today. By purchasing the calls at a volume-weighted average price (VWAP) of $0.41, the buyers will make money the higher MU climbs north of $19.41 (strike plus VWAP) by Friday's close, when the contracts expire.

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