Chesapeake Energy Put Options Hit Target

Here’s a quick update on what is going on with our Chesapeake Energy (CHK, $14.25, down $0.75) trade. The stock lost 5% today and over $2 on Monday after Wall Street seemed disappointed with OPEC having deferred a decision on cutting crude oil production over the weekend.

Other energy stocks have been falling in sympathy as oil futures continue to plunge. Oil fell 10% on Monday and another $2 and change today to settle at $47 a barrel. OPEC’s “decision” to delay a decision on output until later this month has driven oil prices to nearly a four-year low and has helped our bearish position in Chesapeake Energy.

The December 17.50 puts (CHKXW, $3.85, up $0.65) opened at $1.65 last Friday and have easily doubled. These calls were selling for $2.65 yesterday morning when I mentioned them again as we were targeting a run to $3. We got that by yesterday’s close. We are now well above our $3 stop so let’s raise it to $3.50.

The 52-week low for Chesapeake is $11.99 and all signs are pointing to a retest of those levels. However, if by some chance the stock rebounds our stop will protect our profits.

Rick Rouse
Rick@OptionsMentoring.com

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