Chesapeake Energy is seeing large and unusual option activity today.
CHK is down 2.12 percent this afternoon to $14.34 after hitting a three-year intraday low of $14.27 earlier in the session. Shares of the struggling natural-gas company have been losing ground in the last two months from levels above $26 as the company faces controversies involving CEO Aubrey McClendon.
optionMONSTER's systems first detected the purchase of 12,500 July 13 puts for the ask price of $1.50 this morning. Seconds later, 25,000 July 9 puts were sold for the bid price of $0.55. The previous open interest at each strike was fewer than 6,000, so this was a new ratio spread .
The initial trades were broken and replaced, and during that time a block of 25,000 October 22 calls was bought for $0.80. This trade doesn't appear tied to the ratio spread at first glance, but could be. The long calls would profit with the stock above the $22 strike price at expiration in five months.
The put spread cost a net $0.40, which will be lost if CHK is above $13 at expiration. The maximum gain comes if the stock is right at $9 at expiration. Below that level the trader faces assignment and the obligation to buy shares. (See our Education section)
More From optionMONSTER
America has no tolerance for wealthy people griping about their financial woes. But they have concerns too.