New Lows Attract Chipotle Mexican Grill, Inc. (CMG) Options Traders

Chipotle Mexican Grill, Inc. (NYSE:CMG) hit a two-year low earlier

by Josh Selway

Published on Jun 14, 2016 at 11:17 AM

Bearish options traders have been targeting Chipotle Mexican Grill, Inc. (NYSE:CMG) in recent weeks, as the stock falls to new lows. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), CMG sports a 10-day put/call volume ratio of 1.30, which ranks in the 87th annual percentile -- meaning put options have been more popular than normal during the past two weeks. 

It's not like call options haven't seen any activity, though. In fact, put and call open interest on Chipotle now rank in the 92nd and 95th percentiles of their respective annual ranges. This push for CMG options is continuing today, with calls and puts both trading at twice their intraday norms. 

The most popular CMG option today is the June 375 put, where it appears traders are selling to open positions, as confirmed by ISE data. In short, the sellers are counting on the stock staying above $375 through week's end, when the front-month options expire. Looking out slightly further, it's possible other traders are buying to open the out-of-the-money (OOTM) July 400 call, counting on the shares toppling the strike by the close on Friday, July 15. 

Outside the options pits, short sellers have also been targeting CMG. Over the past two reporting periods, short interest on the stock jumped by over 20%, and is now near its highest point in roughly three years. At the stock's average pace of trading, it'd take these bears more than four days to cover their positions. 

This all comes as CMG stock has been getting battered on the charts. The stock has dropped 1.5% today at $388.14, earlier touching a two-year low of $384.77. In fact, CMG has fallen over 12% in June alone, with some on Wall Street wondering whether the company can ever recover from last year's food-borne illness outbreaks.

There's at least one glimmer of short-term hope for Chipotle Mexican Grill, Inc. (NYSE:CMG), though. At last night's close, the stock's 14-day Relative Strength Index (RSI) registered in oversold territory at 28, suggesting a short-term pop could be in the cards.

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