Chipotle Earnings Trade Ideas

• Posted by Greg Harmon
• on October 18th, 2012

PENDING GREG QUOTE

Chipotle Mexican Grille, $CMG, has been bouncing on support of the 200% Fibonacci extension of the retracement of the move higher following the November 2008 low at 278.81. With a Relative Strength Index (RSI) that is bearish and a Moving Average Convergence Divergence (MACD) indicator that was improving but now turning back lower, it has a downward bias. Now through the Fibonacci Arc it may be freed up to move. There is support lower at 270 and 257 followed by 242,

Chipotle Mexican Grille, $CMG

224 and 214. Resistance higher at 303 is followed by 317 and 340. There is short interest near 10% that could give it a kick higher ion a good report. The reaction to the last 6 earnings reports has been a move of about 8.13% on average or $23.50 making for an expected range of 262 to 309. The at-the money October Straddles suggest a roughly $23.50 move by Expiry with Implied Volatility at 173% above the historical at 33% but and November at 49%.

Trade Idea 1: Buy the October26w 275 Put for $9.90.

Trade Idea 2: Buy the October26w 275/265 Put Spread for $3.60.

Trade Idea 3: Buy the October26w 275/265 Put Spread and sell the October26w 260/250 Put Spread for $2.30.

Trade Idea 4: Buy the October26w 275/265/255 put Butterfly for $2.60.

I like #3 best as it covers the expected range and makes money from 273 to 252, with a week to play out.

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