Option Investor

Option Writer Portfolio - August

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Chesapeake Energy Corporation (CHK) is an oil and natural gas exploration and production company that engages in the acquisition, exploration, and development of properties for the production of crude oil and natural gas from underground reservoirs. It also markets natural gas and oil for other working interest owners in properties it operate. CHK reports earnings on July 31st.

Because the earnings are due out in a couple of days the premium on the calls and puts are bid up more than normal. There are 18 days until expiration. Expect some additional volatility with these earnings positions. As the chart below shows the near term support is right at $45 from last Thursday's low. The 200 day moving average seems to be providing additional support for the shares. I have been watching this stock for a long time for an entry this close to major support while still maintaining the integrity of the long term uptrend. A move up to the 89 day moving average (grey line) will prompt me to sell the August 65 Calls as a hedge. The March 20th low of $42.15 is the technical risk management level. I like the fact that the RSI and Stochastics are both re-emerging out of oversold territory.

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