Chesapeake Energy Corporation
) has outperformed the broader
S&P 500 Index
(INDEXSP:.INX) by nearly 25 percentage points over the past three
months, notching an annual high of $27.29 just last week.
Nevertheless, option traders are purchasing CHK puts over calls at
an accelerated clip, either to wager on a pullback or to "protect"
their CHK shares from an unexpected downturn.
During the past two weeks, speculators on the International
Securities Exchange (ISE), Chicago Board Options Exchange (
), and NASDAQ OMX PHLX (PHLX) have bought to open almost two CHK
puts for every call. The resulting 10-day put/call volume ratio of
1.79 stands higher than 90% of all other readings of the past year,
pointing to a much healthier-than-usual appetite for bearish bets
October 24 put
has garnered notable attention, with more than 12,000 contracts
added during the last two weeks. Meanwhile, the October 26 put has
seen more than 11,000 contracts opened in the same time frame. If
the puts were bought to open, the traders could be
locking in an acceptable exit price
for their CHK shares, should the security breach the respective
strikes within the next few weeks.
Elsewhere on Wall Street, short sellers have increased their
bearish positions by 13.3% during the past two reporting periods.
Short interest now accounts for 14.4% of CHK's total available
float, representing more than eight sessions' worth of pent-up
buying demand, at the stock's average pace of trading.
Meanwhile, despite adding more than 61% in 2013, CHK has yet to
convince the brokerage bunch. In fact, just seven out of 24
analysts offer up "buy" or better opinions. Likewise, the consensus
12-month price target of $24.72 represents a discount to CHK's
current price of $26.86. Fundamentally, Chesapeake Energy recently
announced plans to
lay off up to 2,000 workers
in an effort to reduce expenses. Technically, the stock is staring
up at its 80-month moving average, which acted as support for most
of 2011. Should the equity extend its uptrend, an exodus of bears
on Wall Street could add contrarian fuel to CHK's fire.
This article by Andrea Kramer was originally published on
Schaeffer's Investment Research
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