Option Bears Line Up For Chipotle Mexican Grill, Inc. (CMG)

Chipotle Mexican Grill, Inc. (CMG) options traders are unusually put-focused today

Aug 30, 2016 at 12:23 PM
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Chipotle Mexican Grill, Inc.'s (NYSE:CMG) latest attempt to lure back customers turned off by a series of food-safety scandals doesn't appear to be working on Wall Street. The stock was last seen 2.1% lower at $414.34, despite the burrito chain announcing a pair of September sales promotions -- including free kids meals on Sunday. While diners may or may not line up for these deals, one group's interest certainly has been piqued by the announcement -- short-term options traders.

At last check, CMG put options were crossing at an accelerated clip. What's more, the weekly 9/2 series is in high demand, accounting for eight of the 10 most popular strikes. Taking the top spot is the weekly 9/2 415-strike put, where traders are purchasing new positions in hopes of extended downside through this Friday's close, when the series expires.

Historically speaking, this bearish betting is unusual. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), calls have been the options of choice among buyers. Specifically, CMG's 10-day call/put volume ratio checks in at 1.27, in the bullishly skewed 86th percentile of its annual range.

Echoing this bias toward calls over puts is Chipotle's Schaeffer's put/call open interest ratio (SOIR) of 0.87. Not only does this ratio indicate calls outstrip puts among short-term strikes, but it also rests below 92% of all readings recorded in the past year.

That said, an ulterior motive may be driving traders to purchase call options. Short interest has been on the rise, and currently accounts for 17.3% of CMG's float -- or roughly six days' worth of trading activity, based on its average volumes. In other words, it could be that shorts are actually scooping up calls to hedge their bearish stock positions.

Technically speaking, there's good reason to be skeptical of Chipotle Mexican Grill, Inc. (NYSE:CMG). Year-over-year, the shares have surrendered 41.6% of their value. Moreover, the stock faces pressure from its overhead 100-day moving average, which rejected a breakout attempt as recently as late June.

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