Call Players Drill Down On Chesapeake Energy Corporation (CHK)

Chesapeake Energy Corporation's (NYSE:CHK) weekly 4/22 3-strike call is popular today

by Karee Venema

Published on Apr 11, 2016 at 1:00 PM
Updated on Jun 24, 2020 at 10:16 AM

Chesapeake Energy Corporation (NYSE:CHK) is getting a double-barreled boost today from CHK's amended credit agreement and rising crude futures. At last check, shares of CHK were up 13.4% at $4.27, and attempting to notch their first close north of their 20-day moving average since March 22. Against this backdrop, call options on the oil-and-gas stock are trading at eight times the average intraday pace -- with a number of options traders betting on a bigger rally for CHK in the near term.

Beside a massive spread being opened in the April and October series, CHK's April 4 and 4.50 calls are among the most active options. However, with implied volatility up at the majority of strikes and open interest enough to cover volume, it's not easy to tell whether these options are being opened or closed. Elsewhere, though, it looks as if new positions are being purchased at CHK's weekly 4/22 3-strike call. If this is the case, the goal is for the stock to extend its rally through next Friday's close, when the weekly series expires.

More broadly speaking, today's accelerated call volume is nothing new for CHK. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), CHK's 50-day call/put volume ratio of 1.08 rests in the 70th annual percentile. In other words, calls have been bought to open over puts at a faster-than-usual clip.

This optimism seems relegated to the options pits, though. In fact, despite short interest dropping 14.8% in the two most recent reporting periods, more than 35% of CHK's float is sold short. As such, it's possible that a part of the recent rush toward long calls -- specifically, at out-of-the-money strikes -- is a result of shorts hedging against any upside.

Regardless, those currently purchasing Chesapeake Energy Corporation's (NYSE:CHK) short-term options are getting a deal. In fact, CHK's Schaeffer's Volatility Index (SVI) of 114% rests lower than 63% of all comparable readings taken in the past year, meaning premium on the stock's near-term options is pricing in relatively low volatility expectations.

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