After about a year of consideration I have decided to go back in on CHK.
CHK did a massive restructuring after making ill-timed entries into oil and they had new management so we stopped trading an old, reliable favorite but I think things are back under control and they are on track to make $1+ per share next year, for a p/e of 5 a this price - even with these low oil and natural gas prices.
To play them, we can do the following trade for the OOP:
- Sell 20 2019 5 puts for $1.15 ($2,300)
- Buy 20 2019 $5 calls for $2.15 ($4,300)
- Sell 20 2019 $10 calls for 0.70 ($1,400)
That puts us in the $10,000 spread for net $600 with $9,400 of upside potential (1,566%) and, of course, the worst thing that can happen is we end up owning 2,000 shares of CHK for net $5.70 (the current price) and ToS say net margin is just $3,000 so a nice, efficient way to make $9,400!
In the Long-Term Portfolio (LTP), we'll do the same spread but with 50 units of each.
