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Investors buy calls in Chesapeake Energy thanks to a high price target.
Jud Pyle is the Chief Investment Strategist for Options News Network. After four years with SBC Warburg, he joined PEAK6 Investments as an equity options trader and chief risk officer. July 2, 2009 10:59 EDT Related Symbols: CHK
Shares of Chesapeake Energy (CHK) have rallied more than 43% since reaching a 52-week low of $13.50 on March 2, and at least one bullish investor could be betting that the stock might hold at this level during the next few months.
Looking at the Oct. 17.5 puts, an investor sold 10,000 contracts for around $1.30 right out of the gate yesterday, without any significant news from the company. SunTrust Banks, however, recommended that investors buy shares of CHK because they have a price target of $25.
These puts closed unchanged on the day at $1.40 per contract and were home to open interest of 1,943 contracts.
CHK shares dropped 16 cents yesterday to $19.67, and are currently trading down 64 cents to $19.03. This investor needs CHK shares to expire higher than $16.20 to make money.
Bullish options activity such as this does not mean investors should run out and buy up shares of CHK. It’s interesting to note that this investor does not need CHK shares to rally – the investor simply does not want the stock to drop drastically. Bullish investors who agree could also be calling a downside limit in sight for CHK shares on a bet that the stock has more room to rally.
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