BUY, SELL, HOLD (2)

Chipotle Mexican Grill, Inc. (CMG) Options Traders Target Short-Term Bounce

Weekly options traders are active on Chipotle Mexican Grill, Inc. (NYSE:CMG)

Apr 28, 2016 at 1:49 PM
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Chipotle Mexican Grill, Inc. (NYSE:CMG) is up 1.7% today at $424.47, as the stock gains back some of Wednesday's after-earnings losses. Today's pop could also have something to do with CMG's 14-day Relative Strength Index (RSI) of 29, which signals the stock's been oversold and could be due for a bounce. No matter the case, options traders are taking a chance on CMG stock -- even though the it has dropped 44% since its August all-time peak of $758.61. 

With 11,290 calls on the tape, CMG call volume currently ranks in the 90th percentile of its annual range, nearly doubling the expected intraday amount. Most traders are targeting the weekly 4/29 series, which expires at tomorrow's close. The most popular CMG option is the weekly 4/29 435-strike call, where it seems new positions are being purchased. There are still skeptics, however, with buy-to-open activity apparently taking place at the 420-strike put, as traders bet on CMG breaching $420 by week's end. 

Widening the scope, the stock boasts a 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 1.03 that ranks in the 89th annual percentile. This means call buying has been more popular than usual over the past 10 weeks, relative to put buying. Plus, CMG's Schaeffer's put/call open interest ratio (SOIR) of 0.95 ranks near the bottom one-third of readings from the past year, signaling an unusual call-skew among short-term options traders. 

Outside the options pits, short interest jumped 7.1% on Chipotle Mexican Grill, Inc. (NYSE:CMG) in the two most recent reporting periods, and now makes up 10.6% of its float. Moreover, the 3.1 million CMG shares sold short sits near three-year-high territory, and would take about three days to cover, at the average daily pace of trading.

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