Stock / Symbol: [private_monthly]Chesapeake Energy / CHK[/private_monthly]
Price at this post: $27
Strategy: bull put spread
Reasoning: Although they reported great earnings last night, [private_monthly]CHK[/private_monthly] is down nearly 7% today on concerns about their cash burn rate and debt ratios. We think this is a gross overreaction and we're going to take advantage of it by entering into a credit put spread. This trade has an 81% probability of success. We're playing Jan 2012 options but expect to close the trade as soon as the stock trades back up to $30.
Max Risk: $642
Profit Range: $22.15 + by Jan 20
Max Profit: $108 or 16.8% by Jan 20
Suggested Stop @: $22.50
Trade Details: [private_monthly]
STO -3 Jan12 22.5 Puts
BTO 3 Jan12 20 Puts
for a net credit of $0.36 per contract (GTC, limit order)
Requirements;
Cost/Proceeds: ($108.00)
Option Requirement: $750.00
Total Requirements: $642.00
Estimated Commission: $12.95
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