Dan Nathan Sees Unusual Options Activity In Chesapeake Energy

On CNBC's Options Action, Dan Nathan spoke about unusually high options activity in Chesapeake Energy Corporation CHK. Put options outnumbered calls 3 to 1 on Tuesday and a large portion of the put volume was related to one trader.

When the stock was trading at $3.25 the trader decided to sell to close 7,500 contracts of the February 4 puts at $0.99 and he bought to open 15,000 contracts of the February 3 puts for $0.43. The trade breaks even at $2.57 or 16.83 percent lower from the closing price on Tuesday. Nathan believes that this trade is a protection for something other than the equity.