Call-Buying in Chesapeake - TheStreet

Call-Buying in Chesapeake

Buying action in a later-dated call series is boosting options volume in the oil and gas producer.
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By Jud Pyle, CFA, chief investment strategist for the Options News Network

Chesapeake Energy

(CHK) - Get Report

did not announce any news today, but buying action in a later-dated call series is boosting options volume in the oil and gas producer.

We saw at least one investor taking a bullish stance on the company, and bought a hefty number of July 30 calls at a premium of roughly $1.90 per contract. That means investors who bought these calls are looking for the stock to climb to $31.90 (a 20% rally from the current level) by July expiration. Keep in mind, however, that investors could choose to sell these calls if the stock gains significantly before the options expire.

The out-of-the-money July 30 calls have crossed the tape more than 4,500 times today vs. open interest of just 891 contracts, indicating investors bought these options to open. The calls have gained 12 cents on the day, and have an implied volatility of 40.

CHK shares are currently trading up 50 cents, or 2%, to $26.58. The stock is roughly 12% off its 52-week high (CHK shares breached the $30 mark in October).

CHK has not announced an earnings release date, but the market expects the quarterly figures sometime around Feb. 16. It's interesting that the call-buying action we saw today suggests investors are looking for even more movement in the stock long after the company's next earnings report.

Jud Pyle is the chief investment strategist for Options News Network (www.ONN.tv) and the portfolio manager of TheStreet.com Options Alerts. Click here for a free trial for Options Alerts. Mr. Pyle writes regularly about options investing for TheStreet.com.

Jud Pyle, CFA, is the chief investment strategist for Options News Network. Pyle started his career in finance in 1994 as a derivative analyst with SBC Warburg. After four years with Warburg, Pyle joined PEAK6 Investments, L.P., in 1998 as an equity options trader and as chief risk officer. A native of Minneapolis, Pyle received his bachelor's degree in economics and history from Colgate University in 1994. As a trader, Pyle traded on average over 5,000 contracts per day, and over 1.2 million contracts per year. He also built the stock group for all PEAK6 Investments, L.P. hedging, which currently trades on average over 5 million shares per day, and over 1 billion shares per year. Further, from 2004-06, he managed the trading and risk management for PEAK6 Investments L.P.'s lead market-maker operation on the former PCX exchange, which traded more than 10,000 contracts per day. Pyle is the "Mad About Options" resident expert. He is also a regular contributor to "Options Physics."