Options Hot as Traffic Report Slams Chipotle Mexican Grill, Inc. (CMG)

Chipotle Mexican Grill, Inc. (NYSE:CMG) is lower today on reports of weak traffic trends

Oct 11, 2016 at 2:08 PM
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Shares of Chipotle Mexican Grill, Inc. (NYSE:CMG) are down 3.3% at $423.55, amid reports that research firm M Science -- which had a hand in a recent Netflix, Inc. (NASDAQ:NFLX) selloff -- noted lackluster traffic trends at the fast-casual restaurant chain. In CMG's options pits, meanwhile, overall volume is running at 1.7 times the usual intraday pace, with roughly 16,000 contracts traded so far.

Drilling down on today's options activity, the weekly 10/14 series -- which expires at this Friday's close -- is popular, accounting for eight of CMG's 10 most active options. The stock's weekly 10/14 435-strike call has seen the most action, with 1,376 contracts on the tape. Although it's safe to assume new positions are being initiated here, it's not easy to tell whether the bulk of the action is of the buy- or sell-to-open kind.

More broadly speaking, traders at the major options exchanges have bought to open calls relative to puts at a faster-than-usual clip in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), CMG's 10-day call/put volume ratio of 1.41 ranks just 7 percentage points from a 52-week peak.

Outside of the options arena, though, skepticism is steep toward CMG. Short interest jumped 10% in the two most recent reporting periods, and now accounts for a lofty 21.1% of the stock's available float. In fact, the 5.4 million CMG shares sold short is the highest number of bearish bets levied toward the stock since mid-December 2009.

Looking at the charts, CMG has been rewarding short sellers, as opposed to call buyers. Year-over-year, the shares have surrendered roughly 43% of their value. Plus, the $440-$445 region has contained CMG stock since early June, while the security's recent rally attempt off its late-September lows near $400 is running out of steam near its 160-day moving average. As such, it's possible some of the recent call buying is a result of Chipotle Mexican Grill, Inc. (NYSE:CMG) short sellers hedging their bearish bets against any upside risk.

CMG daily chart october 11

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