Chipotle Stock Slips After Ackman Cuts Stake

CMG options remain a bargain, though

Managing Editor
Aug 31, 2018 at 10:05 AM
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Chipotle Mexican Grill, Inc. (NYSE:CMG) stock is trading lower this morning, after a Securities and Exchange Commission (SEC) filing revealed that Pershing Square, the hedge fund run by activist investor Bill Ackman, cut its stake in the company from 10.4% to 7.4%. This makes Vanguard Group the new top Chipotle shareholder, according to Bloomberg. At last check, CMG was down 1.8% to trade at $475.50.

CMG shares are on pace for a fifth straight loss, and have shed more than 8.5% this week. Nevertheless, Chipotle stock is still on track for its sixth straight monthly win -- its longest streak since late 2012/early 2013. Further, CMG boasts a 65% lead in 2018, and touched a two -year high of $530.68 on Aug. 16.

Despite an ambitious bull note earlier this month, most analysts have remained on the sidelines for Chipotle's uptrend this year. Of the 25 brokerages covering CMG, 15 rate it a "hold" or worse. Further, the security's average price target of $465.26 sits below its current perch. 

In the options pits, CMG puts have become more popular lately, as evidenced by data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which shows the security with a 10-day put/call volume ratio of 0.89, in the elevated 71st annual percentile. This means that although options traders still lean toward calls on an absolute basis, Chipotle puts have been purchased relative to calls at a faster-than-usual clip during the past two weeks. 

Those wanting to speculate on CMG stock may want to consider doing so with options. Its Schaeffer's Volatility Index (SVI) of 27% ranks in the 11th annual percentile, meaning short-term options are pricing in lower-than-usual volatility expectations at the moment, a boon to potential premium buyers.


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