Earnings Trade Ideas for Chipotle Mexican Grill and Coca-Cola


special-sale


Chipotle Mexican Grill, $CMG, reports Monday after the close.

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Chipotle Mexican Grill, $CMG, has been holding over a slowly falling trendline since mid-July when the last reported.  The price hit the 100 day SMA last week for the first time since late May and with that the RSI turned back up and the MACD kinked higher as well.  There is resistance at 650 to 653 and then 676 and 688 before 698.   Support lower comes at 640 and then 616 and 605 with a gap to fill to 596.90.  The stock has moved an average of 10.95% after the last 6 reports or $72 at today’s price level.  This leaves an expected range of 578 to 722.  The weekly options chain suggests a smaller $50 move this week, with Implied Volatility at 88%, well above the November options at 38%.  Short interest is moderate at 3.3%.  Open Interest is not unusually large at any particular strike this week or any week out to November Expiry.

Trade Idea 1:   Sell the October 24 Expiry 620/680 Strangle for $26.

Trade Idea 2:   Buy the October 24 Expiry 670/690 1×2 Call Spread for $1 credit.

Trade Idea 3:  Buy the October 24 670/690 Call Spread and sell the October 24 Expiry 600 Put for free.

Trade Idea 4:  Buy the October 24 Expiry 635/610 1×2 Put Spread for a $1 credit.

Trade Idea 5:  Buy the October 24 Expiry 650/675/700 Call Butterfly for $8.

#1 is a play that it does not move more than the options predict, and it takes margin.  #2 and #3 give exposure to both directions but require margin and must be hedged with stock over 710 and under 585.  #3 plays the upside against a possible entry at 600.  #5 looks for a move higher and stall at 675.  I like #2 and #4 together best, then #3 and #1.

Coca-Cola reports before the openTuesday.

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Coca-Cola, $KO, pulled back with the market last week, but held over the support zone and over the 50 day SMA.  The Spinning Top Thursday was confirmed higher as a reversal with the move higher Friday and is seeing follow through buying today into earnings in the morning.  The RSI is turning back higher and never left the bullish zone, with a MACD that is leveling after a move lower.  There is resistance at 43.50 and then the prior high at 44.50.  Support lower comes at 42.30 to 42.50 followed by 41.85 and 41.25 before 40.75 and a gap to fill to 40.20.  The last six reports has seen the stock move an average of 2.93% or $1.27 at today’s price, making for an expected range of 42.10 to 44.70.  The October 24 Expiry Straddles suggest a smaller $1.10 move this week.  Implied volatility in the weeklies is at 28% above the November chain at 16%.  Short interest is low under 2%.  The open interest favors the 42.5 Strike this week with a slight upside bias if it does not hold there.  There are sellers of the weekly 42.5 Put today.

 Trade Idea 1:  Buy the October 24 Expiry 43.50/44.50 Call Spread for 38 cents.

Trade Idea 2:  Buy the October 24 Expiry 43.50/44.50 1×2 Call Spread for 26 cents.

Trade Idea 3:  Buy the October 24 Expiry 43.5/44.5/45 broke wing Call Butterfly for 34 cents. 

Trade Idea 4:  Buy the October 24 Expiry 43/42.50-42 split strike 1×2 Put Spread for free.

Trade Idea 5:  Buy the October 24 Expiry 43/42/41 Put Butterfly for 24 cents.

Trade Idea 6:  Buy the October 24 Expiry/November 44.5 Call Calendar (31 cents) and sell the November 41.50 Put (30 cents) for free.

 

#1, #2 and #3 look for upside price action but with a stall at the prior high this week at 44.50.  #2 requires margin.  #4 and #5 are plays for downward price action with support around the 42.50 strike and zone in the chart.  #4 requires margin.  #6 plays for longer term upward price action, and short term not over 44.50 this week, and requires margin for the short put.  I like the upside, so #6 is my first choice, with #2 and #3 next.  Adding #4 to any of the long plays except #6 (it already has a short put component) makes sense especially if you are comfortable with owning the stock in the long term at 41.50.

 

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