Shares of natural gas producer Chesapeake Energy (CHK) are up 27 percent in the past year amid a strong energy market. One trader sees a further rally in shares in 2023.
That’s based on the January 2024 $100 calls. With 372 days until expiration, 6,499 contracts traded compared to a prior open interest of 229, for a 28-fold rise in volume on the trade. The buyer of the calls paid $9.70 to make the bullish bet.
Shares recently traded around $88, so they would need to rise about $12, or over 10 percent, for the options to move in-the-money. Chesapeake has traded as high as $107 in the past year, so such a move is likely, even in the coming months as the winter heating season plays out.
Even with the move higher in shares, the stock trades at 5 times forward earnings, thanks to a 133 percent jump in revenues in the past year.
Action to take: Investors may like shares here, as energy stocks still have room to run. Plus, shares yield over 10 percent at current prices, offering a high yield for income investors today.
For traders, the options are well positioned, as they could lead to big moves in the coming weeks on any surprise cold weather, or for a longer-term trade as energy prices continue to trend higher.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.