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Chesapeake Energy (NYSE:CHK) is holding its annual shareholders' meeting today, and due to a shareholder outcry, the vast majority of the board of directors will likely be voted out. Also, CEO Aubrey McClendon will be in the hot seat as he faces disgruntled investors who are concerned about the way the company has been handled financially.

Some of the investors were so worried they weren't being given all the information about the company's financial woes that they filed a lawsuit to delay today's meeting. However, they were unsuccessful as a judge ruled the meeting could be held.

The attempt to foil the meeting was the latest of a string of incidents that are aggravating the company. It's as if Chesapeake cannot catch a break. The natural gas producer has been embroiled in controversy after controversy and with each development, its stock takes a hit.

One of the most egregious allegations deals with McClendon who has been dogged about his compensation and the conflict of interest situation he created by securing loans against his stake in company wells to the tune of $1.1 billion.

Fed up with what they say is the company's failure to release more information about these matters, a group of shareholders filed a motion in a U.S. District Court in Texas last month to delay the shareholders' meeting. Late Wednesday, a judge ruled they did not have a case, so the meeting did not have to be delayed.

In addition to the in-house matters, Chesapeake has also faced challenges to its core business of producing natural gas. Prices for natural gas have declined to record 10-year lows. That, coupled with the breakneck pace of Chesapeake's expansion of its pipelines and the subsequent debt it incurred, has contributed to its finances being in dire straits.

These issues have severely affected the company's stock. It has been the worst performing stock in the oil and gas sector over the past year.

Selling assets had been one of the things Chesapeake shareholder Carl Icahn has pushed for the board of directors to do. Also fed up with the board of directors' lack of transparency and ability to shore up the company's finances, Icahn raised the stakes, literally. He increased his stake in the company over the past few weeks to 7.56%, making him one of Chesapeake's top three shareholders. The move to increase his holdings gave him a louder voice that was finally heard by board members and McClendon. Four of the nine board members are being replaced.

Investors are wondering if the moves made over the last few weeks will be enough to right the finances of Chesapeake, which is the second largest natural gas producer in the world. Exxon Mobile (NYSE:XOM) is number one.

At the time of writing, Chesapeake's stock had ticked up to $18, or about 7%, partly on news that it could be selling a major asset, its pipelines, for $4 billion.

Many are trying to figure out how best to trade Chesapeake given the volatility of its stock. If that's you, you may want to consider options.

I last wrote about Chesapeake in May and mentioned covered calls as a good options strategy to employ. Some of my Seeking Alpha peers thought that if investors are willing to consider options, they should also consider puts. Most agree that shorting the stock would be the worst move because it carries unlimited risk.

Chesapeake's recent financial debacles have caused its stock to trade all over the place over the past year. That, coupled with the many unknowns it faces over selling its assets and the prices for oil and natural gas, has made it very difficult to determine how the company will fare in the future. There are so many variables in play. While the stock has ticked up, I think the reason stems from the news of it taking steps to improve. Once these efforts play out over the next six to eight months, I would not be surprised to see the stock settle at $13 to $14.

So if you are bearish about Chesapeake and think it is likely to sink from its current $18 price over the near term, you may consider a bearish put spread. This entails buying one put then selling a lower strike put of the same expiration date to cut your costs. You'd be banking on Chesapeake to go to that short put strike, which is when you make the most money. That's also where your profits will be capped.

However, if you are bullish about the stock, a bullish put spread could be your best option. This options strategy means you will sell a higher striking put option that is in the money and buy a lower striking put option that is out of the money on the same underlying stock with the same expiration date. Keep in mind that if the stock price closes above the higher strike price on expiration date, both options expire worthless and the bull put spread option strategy earns the maximum profit. That profit will be equal to the credit you took when you entered the position.

Source: Bearish Or Bullish On Chesapeake; Put Spreads An Option