"Oil stocks have been hinting at a rebound; as much as I think that crude oil is oversold, natural gas looks even cheaper," says Charles Payne.
The editor of WStreet Strategies explains, "Natural gas has a propensity to become oversold, and this is one of those instances." Here, the advisor reviews a pair of favorites in the sector.
"Natural gas is at April 2005 levels, the economy will drift but it's not going to roll back to levels of three years ago.
"Moreover, demand should surge as the nation's demands on the electric grid increase exponentially over the next few years. Folks, plug-in cars are going to suck up all the coal and natural gas available, and demand even more.
"In the near-term, I think that the risk/reward has shifted substantially and should trade in a range of $6.50 to $9.50, but at some point soon the bias will shift higher.
"Chesapeake Energy (NYSE: CHK) is down big time, and made news for one of the most famous executive margin calls in this current meltdown.
"Although the company's CEO, Aubrey McClendon, was forced to sell over 90% of his holdings he was putting his money where his month was.
Chesapeake Energy (NYSE: CHK) closed at $45.25 Monday. Natural Gas futures are recently down 2.25% to $8.53 according to Bloomberg. BMO Capital Markets has a $68 target price on CHK. CHK September option implied volatility of 61 is above its 26-week average of 42 according to Track Data, suggesting larger price movement.
SPDR Gold Trust (NYSE: GLD), a commodity-based exchange traded security, closed at $86.84. Gold is recently trading down 1.70% to $892.50. GLD option volume was heavy on August 4, 2008 with 106,112 contracts trading. GLD over all option implied volatility of 25 is near its 9-week average according to Track Data, suggesting non-directional price movement.
Companhia Vale do Rio Doce (NYSE: RIO) will report Q2 EPS on August 6. RIO, a Brazilian mineral company, closed at $26.36. Goldman has a Buy rating on RIO. RIO option volume was heavy on August 4, 2008, with 237,545 contracts trading. RIO August option implied volatility is at 66, September is at 56; above its 26-week average of 49 according to Track Data, suggesting larger price movement.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
After hitting a one-year low of $31.38 in August, the stock hit a one-year high of $74.00 last week. CHK opened this morning at $63.48. So far today the stock has hit a low of $63.19 and a high of $65.97. As of 12:15, CHK is trading at $63.77, up $2.19 (3.5%). The chart for CHK looks bullish but deteriorating slightly, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bullish hedged play on this stock, I would consider an August bull-put credit spread below the $50 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 an 8.7% return in just five weeks as long as CHK is above $50 at August expiration. Chesapeake would have to fall by more than 21% before we would start to lose money. Learn more about this type of trade here.
CHK hasn't been below $50 since April and has shown support around $55 recently. This trade could be risky if the price of oil moderates, but even if that happens, this position could be protected by the support the stock might find around $50 where it bottomed in early June.
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 neither owns nor controls positions in CHK.
Chesapeake Energy Corporation (NYSE: CHK) is engaged in the acquisition, exploration, and development of properties for the production of natural gas and crude oil. The firm is the second-largest independent producer and third-largest overall producer of natural gas in the United States. Company properties are located in the US midcontinent region, along the Gulf Coast, in the Permian Basin, and in the Ark-La-Tex region. It owns interests in nearly 39,000 producing wells and has nearly eleven trillion cubic feet equivalent of proved reserves.
Chesapeake pleased investors last week, when it announced that it had formed a joint venture with Goodrich Petroleum (NYSE: GDP) that would give it working interests in deep strata of the Haynesville Shale of East Texas and Louisiana. The move is expected to make Chesapeake the largest U.S. natural-gas producer, pushing it past BP (NYSE: BP) and Anadarko Petroleum (NYSE: APC).
After hitting a one-year low of $31.38 in August, the stock hit a one-year high of $61.44 last week. CHK opened this morning at $60.48. So far today the stock has hit a low of $59.78 and a high of $61.45. As of 11:50, CHK is trading at $60.96, up $1.70 (2.9%). The chart for CHK looks bullish and deteriorating slightly, while S&P gives the stock a bullish 4 Stars (out of 5) Buy rating.
For a bullish hedged play on this stock, I would consider a July bull-put credit spread below the $50 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. This particular trade will make a 4.2% return in just one month as long as CHK is above $50 at July expiration. Chesapeake would have to fall by more than 18% before we would start to lose money.
CHK hasn't been below $50 since April and has shown support around $52.50 recently. This trade could be risky if the prices for oil and other energies fall off some in the next few weeks, but even if that happens, that position could be protected by support the stock might find above $50, where it bottomed out in the past two months.
Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in CHK.
"The boom in natural gas prices has been good for North American producers and their investors, both of which continue to be upbeat on the sector as share prices also keep rising," says Bill Martin.
In his exceptional BullMarket.com, he looks at SandRidge Energy (NYSE: SD), where its billionaire CEO as well as a director have continued to buy shares, despite the stock trading near "peak levels."
"Oklahoma City-based SandRidge focuses on the exploration, development, and production of oil and gas in the West Texas Overthrust, East Texas, and Mid-Continent (Oklahoma) regions.
"President, and CEO Tom Ward purchased 460,000 shares at $48.95 on May 19th/20th, which increased his already substantial holdings to nearly 36.95 million shares, or a 25.27% stake.
"It was the first purchase for Ward since he announced in March his attention to buy up to $100 million in stock on the open market this year. His only other open-market purchase came in November 2007, when he took down 4.17 million shares at $26.00 in the company's initial public offering.
The Charleston Gazette reported that Chesapeake Energy Corporation (NYSE: CHK) has decided not to build its Eastern Division headquarters in Charleston, West Virginia in the wake of a West Virginia Supreme Court ruling on May 22.
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AppleInsider reported that Apple Inc (NASDAQ: AAPL) is expected to announce a back-to-school deal soon that will encourage students to buy new Macs by offering some of the largest incentives in the history of the company.
Chesapeake Energy (NYSE: CHK) shares are trading higher after CHK reported a first-quarter loss of $132 million, or 29 cents per share, last night. However, CHK shares are rising today, as the company's adjusted profit came to $561 million, or $1.09 per share, beating analyst estimates of 93 cents per share. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on CHK.
After hitting a one-year low of $31.38 in August, the stock hit a one-year high of $55.00 last week. CHK opened this morning at $51.82. So far today the stock has hit a low of $50.70 and a high of $52.82. As of 12:35, CHK is trading at $52.67, up $1.73 (3.4%). The chart for CHK looks bullish and steady, while S&P gives the stock a bullish 4 Stars (out of 5) buy rating.
"After coal, natural gas is the No. 2 source for power generation; and the largest source of gas production in the US is now unconventional reserves," explains Neil George.
"Unconventional reserves now account for close to 40% of all domestic gas production. In addition, with the possible exception of deepwater fields, unconventional production is the only domestic source of gas that's likely to show real growth in coming years.
"The term 'unconventional' refers to any gas field that can't be produced economically using traditional well technologies. But, using a combination of new techniques, wells drilled in unconventional fields are prolific producers. US natural gas producers remain on a 17%-plus tear in gains so far this year.
CHK is the largest independent and third largest overall producer of natural gas in the U.S. Bloomberg reports Natural Gas Futures are up .88% to 5.63. CHK has a market cap of $15 billion with long-term debt of $8.3 billion. CHK announced on 8/8/07 a $500 million issuance of convertible senior notes (convertible debts increases volatility). CHK filed to sell EUR $525 million in senior notes on 11/27/06. CHK filed to sell $792 million in senior notes on 12/1/06. CHK filed to sell 30 million shares in a secondary on 12/7/06. CHK October option implied volatility of 33 was above its 26-week average of 28 according to Track Data, suggesting larger price risk.
1.3 billion people, nearly a quarter of the world's population, use KMB brands every day. KMB is recently down 98 cents to $68.42. KMB has a market cap of $29 billion with long term debt of $3 billion. KMB reported 2006 revenue of $16.7 billion. KMB has been frequently mentioned as an LBO candidate in 2006. KMB option implied volatility of 18 was near its 26-week average according to Track Data, suggesting non-directional risks.
Daily options update is provided by Stock Specialist Paul Foster of theflyonthewall.com.
Chesapeake Energy Corp. (NYSE: CHK) opened at $35.11. So far today the stock has hit a low of $35.10 and a high of $36.25. As of 11:00, CHK is trading at $36.14, up $1.10 (3.1%).
After hitting a one year high of $36.22 in early May, the stock has backed off slightly over the past month, but is staying strong with support around $34. Natural gas futures are climbing today, lifting CHK in early trading. Recent technical indicators for CHK have been bullish and deteriorating slightly, while S&P gives the stock a very positive 5 STARS (out of 5) strong buy rating.
For a bullish hedged play on this stock, I would consider an October bull-put credit spread below the $30 range. CHK hasn't been below $30 since March and has shown support around $34 recently. This trade could be risky if crude oil prices retreat sharply, but even if that happens, CHK could find support from its 200 day moving average, which is at $31 and rising.
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 neither owns nor controls a position in CHK.
A recent article by The Motley Fool argued that Chesapeake Energy Corp. (NYSE: CHK) was a much better investment than Citigroup Inc. (NYSE:C). According to Philip Durell's analysis, Chesapeake Energy is one of the country's largest independent oil and gas companies. 92% of the company's assets are in natural gas. Chesapeake Energy has spent $14 million purchasing land on which to ramp up its drilling program. The company currently has proven reserves of 9 trillion cubic feet equivalent in natural gas, enough to last 15 years at current usage levels. Additionally, probable reserves amount to another almost 18 trillion cubic feet equivalent.
The Fool likes Chesapeake Energy for a number of reasons. Natural gas prices do not fluctuate wildly. Gas futures on the NYMEX run between $6.90-$9.20 per million cubic feet equivalent depending how far out the delivery date would be. This is a very profitable price range for Chesapeake Energy, which owns and leases more than half of its 135 drilling platforms. Due to its land purchase program, Chesapeake Energy is able to concentrate drilling platforms, thus reducing operating costs. The company also has experience in various forms of gas drilling and exploration.
Durrell thinks the stock is currently undervalued, trading at 60 cents on the dollar, making it a much better investment option than Citigroup.
Note: The Daily Option Update is provided by Options Specialist Paul Foster of theflyonthewall.com.
stocks rose Monday as 10-year interest rates moved up to 4.66%. The Dow closed up 0.26%, NASDAQ 100 up 0.26%, S&P 500 up 0.27%, and the 10-year bond rate rose to 4.660%. Volatility Index S&P 500 Options-VIX closed down 0.23 to 11.91.
The Gap Implied Volatility & Volume Increases After CNBC's Faber Says Goldman Hired
The Gap Inc. (NYSE:GPS), is the San Francisco-based parent company of 3,200 Gap, Old Navy & Banana Republic stores. GPS closed Monday up $1.37 to $20.26 after CNBC's David Faber reported Goldman Sachs was hired to explore strategic alternatives. GPS CEO Paul Pressler has been operating GPS for over four years. The Los Angeles Times reported a story on January 6 2007 that quoted analysts as saying they expect GPS to make some type of change. GPS call option volume of 21,511 contracts compares to put volume of 17,152 contracts. GPS February option implied volatility of 35 is above its 26-week average of 30, according to Track Data, suggesting larger price fluctuations.
Chesapeake Energy
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Chesapeake Energy
Chesapeake Energy Corporation
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