Bullish Move on Chesapeake: Options

CHICAGO (TheStreet) -- Chesapeake(CHK Quote) did not announce significant news Thursday, but at least one investor is taking a bullish stance on the oil and natural gas name and boosting call volume.

The out-of-the-money April 35 calls have changed hands 20,000 times so far today and are home to current open interest of 727 contracts. These calls are up 25 cents so far on the day to $1.75. This computes to an implied volatility of 49 with the stock around $28.10. Shortly after 1 pm EST, these options traded in one large block of 20,000 for $1.75 per contract.

This means bullish investors who bought the April 35 calls need CHK shares to expire higher than $36.75 to make money, unless of course the calls rise prior to expiration following a rise in the shares and the investor chooses to sell them to take profits.

The April 35 calls have a delta of about 33, which means for every dollar move in the underlying, these options should climb 33 cents. Given that CHK is currently up approximately 50 cents to $28.10, these calls should have moved up roughly eight cents, but the call-buying activity pushed the price higher than the delta would suggest, sending the calls up 25 cents.

Normal daily option volume in CHK is approximately 47,000 contracts, so this type of volume is not highly unusual for CHK. However, what is unusual about it is that these options all traded in one block, and that it caused implied volatility to rise in that option. Rather than the options being spread out among multiple buyers, this is one investor betting that CHK will continue to move.