What's Up with CHK Stock? Some thoughts...
Chesapeake Energy Corporation (NYSE: CHK) is having yet another incredibly strong start to the trading session this morning, following up on the impressive gains that we’ve seen on the stock as of late. So, what’s in store for the stock? In my opinion, there are more gains to come. Today, we’ll talk about:
- Why CHK has been headed up;
- what we’re seeing from the stock;
- why we believe big gains are just around the corner;
- and what we’ll be watching for ahead.
Why CHK Is Headed Up
The truth of the matter is that it’s not just Chesapeake Energy. Just about every company in the oil and energy sector is seeing gains in the market, and it’s happening for a very good reason. Oil has been trading at incredible lows for some time as the result of a global supply glut. However, that glut is shrinking. Efforts made by OPEC to balance oil may have taken a while, but they seem to be laying a solid foundation for growth.
Adding to the solid foundation laid by OPEC with regard to support for growth in the price of oil, the Trump Administration recently placed sanctions on Iran surrounding a nuclear weapons agreement. With these sanctions, Iranian oil will no longer make it to many of the world’s largest consumers of the commodity. The kicker here is that Iran is one of the world’s largest oil producers and the third largest producer in the OPEC oil cartel. As a result, the oil supply glut that is already disappearing is expected to disappear much faster. At the end of the day, CHK is a company that makes its money through oil and natural gas. As the glut dissipates and the price of oil climbs, the company stands to see increasing revenue and earnings.
What We’re Seeing From The Stock
The reality is that the news moves the market, and while Chesapeake Energy hasn’t released any news of their own, the gains in oil and news surrounding the industry are pushing the stock for the top. Of course, our partners at Trade Ideas were the first to alert us to the gains. Currently (11:31), CHK is trading at $4.84 per share after a gain of $0.23 per share or 5.10% thus far today.
Why We Believe These Gains Will Continue
Ultimately, the reason that we believe that gains will continue has to do with supply and demand data surrounding oil. At the moment, the United States, Canada, and many of the world’s largest consumers of oil are entering summer months. These are months of travel and increased demand for oil. At the same time, we are seeing sanctions on a massive producer and continued reductions in the supply glut. Ultimately, this means that oil supply and demand is starting to find balance, and in the oil industry, balance harbors growth. We’re not the only people that see something big around the corner.
In fact, May 25, 2018 $3.50 Put Options had some of the highest implied volatility of all equity options today. Implied volatility is a great indicator of something big to come. When implied volatility high, as it is on CHK, traders believe that something big is going to happen that will send the stock either on a strong run toward the top or run toward the bottom. Considering this, mixed with the fundamental reasons that we believe oil will head up in value, it will be surprising not to see a big run soon.
What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on CHK. In particular, we’re interested in following the oil industry and the sanctions on Iran. Of course, movement in these stories will likely lead to movement in the stock. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
Read more: https://cnafinance.com/chesapeake-energy-chk-stock-yet-another-day-...
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Investors in Chesapeake Energy Corporation CHK need to pay close attention to the stock based on moves in the options market lately. That is because the May 25, 2018 $3.50 Put had some of the highest implied volatility of all equity options today.
What is Implied Volatility?
Implied volatility shows how much movement the market is expecting in the future. Options with high levels of implied volatility suggest that investors in the underlying stocks are expecting a big move in one direction or the other. It could also mean there is an event coming up soon that may cause a big rally or a huge sell off. However, implied volatility is only one piece of the puzzle when putting together an options trading strategy.
What do the Analysts Think?
Clearly, options traders are pricing in a big move for Chesapeake Energy shares, but what is the fundamental picture for the company? Currently, Chesapeake Energy is a Zacks Rank #3 (Hold) in the Oil and Gas - Exploration and Production - United States industry that ranks in the Top 33% of our Zacks Industry Rank. Over the last 60 days, one analyst has increased its earnings estimates for the current quarter, while six analysts have dropped their estimates. The net effect has taken our Zacks Consensus Estimate for the current quarter from 13 cents per share to 12 cents in that period.
Given the way analysts feel about Chesapeake Energy right now, this huge implied volatility could mean there’s a trade developing. Often times, options traders look for options with high levels of implied volatility to sell premium. This is a strategy many seasoned traders use because it captures decay. At expiration, the hope for these traders is that the underlying stock does not move as much as originally expected.
Read more: https://finance.yahoo.com/news/options-traders-know-something-chesa...ml
Views: 678
Replies to This Discussion
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Permalink Reply by Skip Peel - Mineral Consultant on -
Oil and stock prices are volatile. CHK, owing to its leverage and reputation, often moves more than other publicly traded E&P companies on negative news. Things can change quickly. Just as they have in the last 72 hours.
Chesapeake Energy's stock suffers biggest drop in 2 years, after oil prices plunge
Published: May 25, 2018 2:29 p.m. ET By TomiKilgore Reporter and editor marketwatch.com
Shares of Chesapeake Energy Corp. CHK, -5.49% plunged 9.8% in active afternoon trade Fiday, putting them on track for the biggest one-day selloff in two years, as oil prices tumbled toward the lowest levels seen in weeks. Trading volume reached 55.4 million shares, enough to make the stock the most actively traded on the New York Stock Exchange. The selloff would be the biggest one-day percentage decline since it tumbled 10.7% on May 9, 2016. Weighing on the oil and gas company's stock was the 4.2% plunge in crude oil futures prices CLN8, -4.54% which was triggered by talk that Russia and the OPEC oil cartel could increase output. The stock has gained 3.7% year to date, while the SPDR Energy Select Sector ETF XLE, -2.60% has tacked on 2.8% and the S&P 500 SPX, -0.24% has edged up 1.7%.
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Permalink Reply by Keith Mauck (Site Publisher) on
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LOL, so true..
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