Why puts are surging in Chesapeake

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Chesapeake Energy is seeing short-term put activity as the oil and natural-gas driller trades near six-month lows.

optionMONSTER systems show that 5,000 Weekly 17 puts have traded, most of them sold for the bid price of $0.32 against open interest of 5,259. Those puts finish trading today.

At the same time, more than 7,000 December 16.50 puts changed hands, with the big blocks bought for $0.27 in volume far above the previous open interest of 585. These contracts expire at the end of next week.

It appears that the trader is rolling the a long-put position to the later-dated lower strike as the current Weekly 17 contracts expire. The puts could be an outright bearish play or a hedge against an existing long position in the stock. (See our Education section)

CHK is trading at $16.70, up fractionally on the day. Yesterday's close was just slightly above that of Nov. 15, its lowest since June 1.

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