Most Active Options: Chesapeake Energy, Freeport-McMoRan

Short-term Chesapeake Energy Corporation (NYSE:CHK) and Freeport-McMoRan Inc (NYSE:FCX) options appear to be attractively priced

Dec 12, 2016 at 1:37 PM
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The 20 stocks listed in the table below have attracted the highest options volume during the past 10 trading days. Stocks 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. Among the stocks attracting notable attention are oil-and-gas name Chesapeake Energy Corporation (NYSE:CHK) and mining issue Freeport-McMoRan Inc (NYSE:FCX) -- two of the best-performing S&P 500 Index (SPX) stocks since the election. Here's a quick look at how options traders are lining up on CHK and FCX. 

Most Active Options Dec 12

CHK call options have been extremely popular in recent weeks amid the stock's strong showing on the charts. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows a 10-day call/put volume ratio of 4.66, which tops 88% of the past year's readings. In short, call buying has been much more popular than normal.

At the same time, call traders have been employing another strategy, as well. During the past two weeks, the front-month December 8 call -- which expires at the close this Friday -- has seen the largest increase in open interest among all options yet to expire. However, based on data from the major exchanges, the vast majority of positions here were sold to open, meaning short-term traders are betting on CHK stock holding below the closely watched $8 mark. Sure enough, this is the most popular option again in today's trade, with the ISE confirming at least some sell-to-open action. 

Unfortunately for these traders, it seems to be a much better time to buy premium than sell it. This is according to the stock's Schaeffer's Volatility Index (SVI) of 61%, which is just 1 percentage point from an annual low -- meaning low volatility expectations are being priced into CHK options. While the shares have gained significantly since their most recent bottom near $5 in early November, they were last seen 1.7% lower at $7.59. Earlier, however, the stock touched an annual high of $8.20 amid broader energy tailwinds.

Like CHK, FCX call options have been extremely popular in the past two weeks, with data from the ISE, CBOE, and PHLX showing a 10-day call/put volume ratio of 2.63 -- ranking in the 94th annual percentile. Taking a closer look at the largest increases in open interest during this time frame, the February 19 call takes the top spot by a wide margin, with roughly 23,500 positions added. As for the front-month series, FCX's December 15 put leads the way, with almost 6,800 new positions. Data from the major exchanges suggests there's been a steady mix of buy- and sell-to-open activity at each. 

It's not surprising to see the $15 level in focus, since the shares have been consolidating atop this mark in recent weeks. Going back further, FCX stock has picked up 67% since hitting $9.24 on Oct. 13, but the stock is down 2% today at $15.43. 

Regardless, Freeport-McMoRan Inc's (NYSE:FCX) SVI of 52% ranks in the low 11th annual percentile, so it seems to be a promising time to buy premium, at least on short-term options. What's more, FCX and Chesapeake Energy Corporation (NYSE:CHK) both have very elevated Schaeffer's Volatility Scorecards (SVS), with respective readings of 96 and 87. So, not only could it be an opportune time to buy short-term options for both stocks, but each underlying has tended to make bigger-than-expected moves on the charts during the past year, relative to what the options market has priced in. 

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