NEW YORK -- As oil keeps running higher, bullish option traders are charging into Chesapeake Energy ( CHK) ahead of quarterly results next week.
OptionMonster's Heat Seeker system detected the purchase of about 20,000 May 16 calls for 22 cents to 53 cents on Thursday afternoon. Volume was almost four times the previous open interest in the strike, an indication that new money was at work.
Traders also bought the May 15 calls for $1.13 to $1.15 later in the session. About 11,000 of those contracts traded against open interest of 5,465 in that strike.
Long calls lock in the price where investors can buy a stock, letting them position for a rally at limited cost while providing potentially significant leverage. They carry less risk than owning shares because the most that can be lost is the price of the options no matter how far the stock might fall.
Chesapeake rose 4.44% to $15.77 on Thursday. The oil and gas producer gapped down from $20 after its last earnings report in February but is now breaking above its 50-day moving average for the first time since then. First-quarter numbers are due before the opening bell on Wednesday, seven sessions before Thursday's long calls expire.
Total option volume in Chesapeake was more than twice its daily average for the last month. Overall calls outpaced puts by 2 to 1.
Related names such as Southwestern Energy have seen heavy option activity as well. Its May 26 calls, for instance, more than tripled in value by Thursday after being cited on our InsideOptions Pro subscription service last month.
-- Written by Mike Yamamoto of OptionMonsterYamamoto has no positions in the stocks mentioned.