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Option Clips: Chipotle Mexican Grill, IBM, and SanDisk Corporation

Reviewing notable options activity on Chipotle Mexican Grill, Inc., International Business Machines Corp., and SanDisk Corporation

by 4/17/2014 1:15 PM
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Three equities generating post-earnings buzz on StockTwits today are restaurateur Chipotle Mexican Grill, Inc. (NYSE:CMG), blue-chip tech titan International Business Machines Corp. (NYSE:IBM), and memory device maker SanDisk Corporation (NASDAQ:SNDK). Here's a look at how traders have been aligning their speculative bets today.

  • After rallying as high as $588.69 in intraday action, Chipotle Mexican Grill, Inc. (NYSE:CMG) is 1.6% lower at $543.42, despite reporting stronger-than-expected quarterly earnings and upping its full-year sales guidance. In addition, the company's board approved a $100 million increase to CMG's stock repurchase plan. Against this backdrop, total options volume is running at five times the intraday average, and the stock's 30-day at-the-money (ATM) implied volatility (IV) has plummeted 37.5% to 26.6%. While some of the recent option bulls may have cashed in their chips, a slew of traders are initiating eleventh-hour bets ahead of the close today, when April-dated options expire. The 10 most active options are, in fact, soon-to-expire front-month strikes, and all 10 have seen volume surpass open interest, hinting at fresh positions.

  • International Business Machines Corp. (NYSE:IBM) has dipped 3.3% to $189.90, after the firm reported a decline in first-quarter profit and revenue. However, the stock has found an ally in its 10-week moving average, which -- along with its 20-week counterpart -- has served as support since mid-February. Big Blue has seen a post-earnings drop of 27.5% in its 30-day ATM IV, which now sits at 15.3%, and overall options volume is running at four times the norm. While the options crowd was stocking up on puts ahead of last night's report, at least one cautious option bull is gambling on a short-term rebound for IBM. Specifically, it appears the trader constructed a bull call spread at the weekly 5/23 197.50- and 205-strike calls, for a net debit of $0.62 per pair of options. The spread will be profitable if IBM surmounts breakeven at $198.12 (bought call strike plus net debit) at options expiration on Friday, May 23.

  • Finally, SanDisk Corporation (NASDAQ:SNDK) is one of the biggest advancers on the Nasdaq today, thanks to well-received quarterly earnings and guidance. The shares are flirting with a 10.3% gain at $83.64 -- just a chip-shot from their all-time high of $85.37, tagged earlier this month. So far today, SNDK has seen roughly 25,000 calls cross the tape -- five times its average intraday volume -- and its 30-day ATM IV has notched a 24.8% post-earnings drop to 28.2%. For comparison, around 14,000 SNDK puts have changed hands. In fact, the four most active strikes are calls, and the July 85 call is the lone strike with a shelf-life longer than a few hours. The company's solid earnings showing likely has a few bears spooked, too. In the two weeks heading into the report, speculators on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) bought to open more puts than calls, and the resulting 10-day put/call volume ratio of 1.40 stands just 14 percentage points from an annual high.


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