Soaring Chesapeake Energy Corporation (CHK) Sees a Rare Surge of Call Volume

Chesapeake Energy Corporation (NYSE:CHK) is trading 20% higher today, and calls are in high demand

by Karee Venema

Published on Mar 2, 2016 at 2:06 PM
Updated on Mar 4, 2016 at 8:49 AM

Chesapeake Energy Corporation (NYSE:CHK) has jumped 19.9% today to $3.31, as the stock reacts to news ex-CEO Aubrey McClendon* was indicted** by the Department of Justice (DOJ) on antitrust charges -- and stabilizing crude futures. Against this backdrop, calls are crossing the tape at an accelerated clip, marking a change of pace in CHK's options pits.

*Update: Earlier today, McClendon died in a car crash at the age of 56. According to the Oklahoma City Police Department, he crashed while driving "at a high rate of speed."

**An earlier version of this article incorrectly stated McClendon was found guilty. He was, in fact, indicted by a federal grand jury.

Specifically, calls are changing hands at 1.6 times what's typically seen at this point in the day, and are outpacing puts by a more than 2-to-1 margin. New positions are being initiated at CHK's weekly 3/11 3-strike call -- which expires at next Friday's close -- though it's unclear as to whether these options are being bought or sold.

Widening the sentiment scope reveals put buyers have dominated CHK's options arena. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 50-day put/call volume ratio of 2.25 sits in the 95th annual percentile.

Echoing this put-heavy backdrop is CHK's front-month gamma-weighted Schaeffer's put/call open interest ratio (SOIR) of 3.35. What this means is that near-the-money put open interest more than triples call open interest among options in the March-dated series.

This skepticism is seen elsewhere on the Street, as well. Short interest jumped 4.4% in the most recent reporting period, and now accounts for more than two-fifths of CHK's available float. Plus, all but one of the 18 covering analysts maintain a "hold" or worse suggestion.

This pessimism isn't too surprising, given Chesapeake Energy Corporation's (NYSE:CHK) long-term technical troubles. Year-over-year, the shares are off 80%, and tagged a record low of $1.50 on Feb. 8. However, thanks to today's surge, CHK is on pace to notch its first close north of its 40-day moving average since last October.


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