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Company Description:

Chesapeak Energy (CHK) is engaged in the exploration and production of crude oil and natural gas properties throughout the US. CHK has been beated down along with most energy related stocks. However, it seems to collect the a good portion of the energy sector allocation volume on the up days. I would prefer to see the stock above the 8 day EMA (purple line at 20.58) prior to selling any puts. As I write this the markets are selling off into the close as funds are apparently raising capital for more redemptions. The stocks that have been relatively stable over the last two weeks are being sold in order to raise cash. For instance, CME Group, Wells Fargo and Apple are down.

Sell half the normal allocation of the November 12.5 Puts (CHKWV) for $1.00. The margin requirement is about $250 for two contracts. The earnings are due at the end of October. Use the low from Wednesday or $15.90 as the technical stop. If the stock moves above the 8 day EMA, sell the remaining allocation.

P.S. I will send out some additional plays over the weekend and discuss the position allocation strategy in greater detail. Have a nice weekend!

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