The S&P 500 Index (SPX) is pacing toward a rare September win — and heading into the historically positive month of October. And while the airline sector features some of the best SPX stocks to own next month, oil-and-gas name Chesapeake Energy Corporation (NYSE:CHK) has been one of the worst stocks on the S&P over the past 10 years. With the energy stock trading near a potential resistance and short-term options attractively priced, it might be a good time to buy puts on CHK.
CHK Stock Heads Into Tough Month Trading Near Resistance
According to data from Schaeffer’s Senior Quantitative Analyst Rocky White, Chesapeake shares have averaged a monthly loss of 3.77% in the last decade, finishing October in positive territory just four times. This would be more of the same for a stock that’s down 37.6% year-to-date.
More recently, the shares have been rebounding since bottoming at an annual low of $3.56. But while the stock was last seen trading down 1% at $4.38 — despite rising oil prices — it’s running out of steam in the $4.40-$4.50 region. This neighborhood is home to familiar resistance at its 80-day moving average, and a trendline connecting a series of lower highs since April.
Increased Short Selling Could Turn Up the Heat on Chesapeake Energy
Part of Chesapeake’s longer-term technical troubles have likely been due to a steady influx of short selling this year. Since the start of 2017, short interest on CHK stock has nearly doubled to 199.87 million shares — 22.75% of the equity’s available float. With bears firmly in control, the security could continue to struggle, should short sellers keep increasing their exposure to the stock.
Meanwhile, two volatility indicators we track suggest low expectations are being priced into CHK stock’s short-term options — a potential boon to premium buyers. While the security’s 30-day at-the-money implied volatility of 48.5% ranks lower than 90% of all comparable readings taken in the past year, its Schaeffer’s Volatility Index (SVI) of 48% is docked in the 6th annual percentile.
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