Carl Icahn Discloses 5% Stake in Chesapeake Energy

CHK opened this morning at $23.81. So far today the stock has hit a low of $23.77 and a high of $25.04. As of 11:55, CHK is trading at $24.91 up $1.61 (6.9%). The chart for CHK looks bullish and S&P gives CHK a positive 4 STARS (out of 5) buy ranking.

For a bullish hedged play on this stock, I would consider an April bull-put credit spread below the $20 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 7.1% return in four months as long as CHK is above $20 at April expiration. Chesapeake Energy would have to fall by more than 19% before we would start to lose money. Learn more about this type of trade here.

CHK has not been below $20 except for a handful of days in the past year and has shown support around $22.70 recently.

Brent Archer is an options analyst and writer at Investors Observer.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent controls bullish hedged positions in CHK.