Hey there Extreme Investor Network readers,
Today, we’re diving into the recent news surrounding Chipotle Mexican Grill (CMG) and discussing how the CEO transition could present an opportunity for options traders.
While the stock initially took a hit after CEO Brian Niccol left to join Starbucks, it’s important to take a step back and look at the bigger picture. Chipotle has consistently exceeded earnings estimates quarter after quarter, with the last four quarters all beating expectations. In addition, the company raised its forward guidance in the most recent earnings report, indicating a positive outlook for the future.
Looking at the technical side of things, the one-year daily chart of CMG shows that the stock is currently hovering around the 200-day simple moving average (SMA), which is a key support level for many market technicians. Recent price action also reflects signs of mean reversion, with higher highs and higher lows, while the Relative Strength Index (RSI) is coming out of oversold territory, signaling a potential uptrend.
To capitalize on this opportunity, I am considering a bullish trade strategy known as a “bull call spread.” This involves buying an at-the-money (ATM) call option and simultaneously selling an out-of-the-money (OTM) call option. Adjusting the strikes based on CMG’s current price, this trade allows for potential profits if the stock trades at or above the short strike by the expiration date.
As always, it’s important to monitor the market’s reaction and adjust your strategy accordingly. Keep in mind that emotions can drive market movements in the short term, so it’s crucial to stay informed and adaptable.
Stay tuned for more updates and insights from Extreme Investor Network, where we provide unique perspectives and actionable strategies to help you stay ahead in the world of investing. Happy trading!