CHK

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January 19, 2010

Sold CHK, bought DBC

Posted by ReasonablyThinking under All Commentary, CHK, Stock purchases, bought to cover, Stock sales, short sales, Trade History, Trade highlights | Tags: , |
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I sold my position of Chesapeake Natural Gas (CHK) today.  My orignal thesis is no longer valid, and the stock is probably fairly valued.  The main fear is that the supply of natural gas will become (or already is) excessive relative to the demand for natural gas.  This would move the price of natural gas lower, which would hamper producers like CHK.

Previously, I had written a call option (covered call position) that expired last Friday, and I considered writing another call.  However, I view the risk of principal loss as too great and am happy to walk away with a profit.  Further, since I held this position for a year, this gain is taxed at a long term capital gains rate.

Having sold CHK, I still desire a broad exposure to commodities.  Even though commodities have risen, and are likely to pull back, I purchased the Deutsche Bank Commodity Index (DBC), 50 shares at $24.50.    This purchase uses less than half of my funds from CHK, and I intend to increase my allocation to commodities on price weakness.

Taking the two trades together, I am now less exposed to natural gas and more broadly exposed to commodities.  I have less money on the table and am in position to increase my stake on price weakness.

Here is my history for CHK.  As you can see, I stumbled out of the gate on this, but catching the bottom and writing two covered call positions turned out to be great tactical manuevers.

9/15/2008 CHK bought 40 39.45 -1585
10/15/2008 CHK dividend 40 0.075 3
1/15/2009 CHK dividend 40 0.075 3
1/15/2009 CHK bought 60 14.38 -869.8
4/15/2009 CHK dividend 100 0.075 7.5
5/4/2009 CHK write call July $25 1 1.1 101.74
7/15/2009 CHK dividend 100 0.075 7.5
9/10/2009 CHK write call Jan $28 1 1.5 141.74
10/15/2009 CHK dividend 100 0.075 7.5
1/15/2010 CHK dividend 100 0.075 7.5
1/19/2010 CHK sold 100 28.20 2812.96
          637.64
 

September 10, 2009

sold CHK call

Posted by ReasonablyThinking under All Commentary, CHK, Stock sales, short sales, Trade History, Trade highlights | Tags: |
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I wrote a covered call option on Cheasapeake Energy (CHK) today.  The expiration is January 2010 with a strike price of $28 (.HKWAB).  The contract price was $1.50.  Since I held shares in CHK prior to 2009, this trade will not appear in the Performance Page.

My thoughts are:

  • I don’t intend on selling CHK in the near term (next four months)
  • The market is overvalued and has gone up five days in a row (giving me an exit opportunity)
  • I’d be happy to get called out at $28
  • Besides, S&P has a 12 month price target at $28.  So, if it gets there before then, I’ll save myself eight months of time and keep the call premium
  • Downside risk, I forgo upside potential
  • Bottom line, I’m just trying to generate some income here