27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.
Shares of Chesapeake Energy Corporation (NYSE: CHK) were up Thursday despite Bank of America's reduction in its price target.
The firm cut its price target from $17 to $9 following the company’s update of the production outlook (and debt structure) laid out in its latest presentation. “In a nutshell, CHK’s cashflow multiple is overwhelmed by absolute leverage and more hefty realization discounts inherited from prior management's strategy that passed significant value to a former midstream subsidiary."
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While the analysts believe CEO Doug Lawler has "taken steps to reposition Chesapeake operationally and from the standpoint of reduced organizational complexity," their base case is that a recovery in oil prices still leaves the company's multiple elevated for an extended period.
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While high profile shareholders have recently upped their bets, the firm views this as “more about averaging down existing high cost positions on a directional view of the commodity than any fundamental improvement in CHK’s outlook.”
Bank of America expects EPS of ($0.25) for 2015, $0.10 for 2016, and $0.69 for 2017. All estimates are well below consensus of $0.15, $0.28 and $0.83, respectively.
Under the base case that assumes a recovery in oil and gas prices to approximately $70 WTI and $4.00 gas by 2018, the analysts estimate Chesapeake’s cashflow at roughly $3.5 billion. At an average mid-cycle multiple of 6x, the implied EV of $21 billion net of substantial debt and equivalents leads to an implied equity value of just $6 billion and associated price target of about $9.
Shares closed at $14.59, up 1.6 percent.27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.