Burrito Earnings Ideas

Chipotle Mexican Grill, $CMG

Chipotle Mexican Grill, $CMG, gapped up in October following earnings and has not done much since. The only notable action is that it held the top of the consolidation zone until the Bollinger bands opened last Tuesday and dumped it lower. But that dump held the gap and it is trying to move up ahead of earnings tonight. The Relative Strength Index (RSI) is turning back up as well and the MACD has leveled, at least stopping the plunge. These are positive. The trend remains neutral in the chart though in short term with an upward bias. Support comes lower at 482 and a gap fills at 442 below that. Resistance higher is found at 508 and 550. The reaction to the last 6 earnings reports has been a move of about 12.17% on average or $60 making for an expected range of 434 to 555. The at-the money January Straddles suggest a smaller $39 move by Expiry tomorrow with Implied Volatility at 168% above the February at 45%. Short interest is moderate at 6%. The largest options trades yesterday were sellers of the 435/525 strangle and today sees the 480/520 weekly call spread active.

cmg

Trade Idea 1: Sell the January 435/555 Strangle for a for $4.65 credit. Almost a 1% payout with a massive range for 1 day risk.

Trade Idea 2: Buy the January/February 550 Call Calendar (Buy Feb and sell Jan) for $3.00. looking for a range break to the upside, after tomorrow.

Trade Idea 3: Buy the January 500/525/550 Call Butterfly for $5.50. An upside play looking for some congestion to stall it at the 525-530 range.

Trade Idea 4: Buy the February 7 Expiry 500/January 520 Call Diagonal (buy Feb and sell Jan) for $11.00. Looks for a move higher but not above 520 tomorrow.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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