Sold CHK Naked Puts

I saw T. Boone Pickens on CNBC earlier this week talking about his plan to reduce our dependence on foreign oil.  Wind is a major part of the plan.  Natural gas is also a part of the plan.  He plans to make his money on the wind farms he has bought the land for and plans to develop.  He mentioned the uses for natural gas a few times and that led me back to Chesapeake Energy Corp (CHK). 

I planned to look it up earlier to see how the options were moving and forgot to do it for a couple of days.  When I saw the markets down big this morning I remembered to look again and saw CHK up nicely.  I checked the chart and saw CHK gapped up today and also saw what could be support around $58 based on the rising trend line of higher lows.  That’s also close to the 50 day moving average.  I was looking at August puts since the September contracts aren’t posted yet and started to place a limit order at the 57.50 strike, but changed it to the 60 strike to bring in more cash flow, albeit with a greater risk.

While CHK was trading at $64.83 I sold two CHK August 60 naked puts and received $498.50 after commissions.  Had I been on the ball a little better, I would’ve been able to get my trade in a day or two ago, before today’s rally.  That would have meant I could have sold the puts at a lower strike and probably gotten as much if not more for the premium.  Along with waiting too long to get in, I also got in too soon once I started paying attention.  I made the rookie mistake of not using a limit order above the current bid/ask.  I sold at the bid in the overly anxious moment of thinking CHK would never take a breather.  It was above the 10 and 20 day moving averages when I sold these options, but has moved below both moving averages since then.  I believe that crack above, even if only briefly, is paving the path to make a stronger, longer move higher.  I plan to hold CHK in my portfolio for a while by continuing to write naked puts and if assigned the shares then I’ll write covered calls.

Another natural gas play can be Devon Energy (DVN).  It’s down today and I haven’t researched to find out why yet.