Options Traders Snub Chesapeake Energy Corporation (CHK) Surge

Chesapeake Energy Corporation (NYSE:CHK) is hot today, after the energy firm put some of its assets up for sale

by Karee Venema

Published on May 5, 2016 at 10:28 AM
Updated on May 5, 2016 at 10:52 AM

Chesapeake Energy Corporation (NYSE:CHK) is soaring this morning, as oil prices pop and the energy firm said it would sell some of its Oklahoma assets to Newfield Exploration Co. (NYSE:NFX) as part of a larger fundraising effort. This is helping to overshadow a big first-quarter revenue miss, with CHK's quarterly sales plunging 39% year-over-year. Against this backdrop, CHK stock is up 7.1% at $6.05 -- but weekly options traders aren't convinced the equity can sustain this positive price action.

Specifically, CHK's weekly 5/27 6-strike put is seeing notable attention in early trading. It appears as if some of these puts are being bought to open, as options traders bet on the energy stock slumping back below $6 by the close on Friday, May 27 -- when the weekly series expires.

More broadly speaking, options traders have shown a preference for long puts over calls in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for instance, 76,593 puts have been bought to open on CHK over the past month, versus 64,169 calls -- resulting in a top-heavy 20-day put/call volume ratio of 1.19.

Echoing this is CHK's gamma-weighted Schaeffer's put/call open interest ratio (SOIR) of 1.22. In other words, near-the-money put open interest outweighs call open interest among options set to expire in three months or less.

This skepticism is seen outside of the options pits, as well. Although short interest dropped 34% in the two most recent reporting periods, it still accounts for more than 23% of CHK's available float. Plus, all but one of the 20 analysts covering the stock maintain a "hold" or worse recommendation.

On the charts, Chesapeake Energy Corporation (NYSE:CHK) has been rebounding along with crude oil in recent months, almost quadrupling since hitting a 16-year low of $1.50 on Feb. 8. More recently, an analyst-induced slide earlier this week was contained by CHK's 200-day moving average -- a trendline that has recently emerged as support.

CHK daily chart

Sign up now for Schaeffer's Market Recap to get all the day's big stock movers, must-know technical  levels, and top economic stories straight to your inbox.

A Schaeffer's exclusive

6 Sectors for Summer

Access your FREE insider report before it's too late!


  
 

Partnercenter


NEW! Explore Schaeffer’s Partners' deals and get connected to top online brokerages with deals tailored exclusively for our readers.  Get answers to your questions regarding transfer fees, commission rates, programs and available discounts related to online trading services.

MORE | MARKETstories


The Next Big Player in U.S. MJ Boom
Most pure-play marijuana stocks in the U.S. trade on the Over-the-Counter stock exchange.
Wall Street Roars Higher Amid Civil Unrest
Investors weighed a mixed bag of jobs data
AstraZeneca Stock Flat Despite COVID-19 Vaccine News
AstraZeneca saw a rise in capacity for its COVID-19 vaccine candidate
The Next Big Player in U.S. MJ Boom
Most pure-play marijuana stocks in the U.S. trade on the Over-the-Counter stock exchange.