I sold a put this week in CMG as the stock is under pressure (again) and had wanted to jump in even earlier (where the green arrow is) but had not researched and checked into what was going on with the stock. While the stock did recover and have a decent swing, which would have allowed me to close......I am glad I waited as a practice for restricting those impulsive trades. I traded this name last year and had mixed results with my 401 getting decent gains and my reg-T taking a sizeable hit. I have the means to defend better this time and still hold min. 50% cash reserves. I like the stock and the company overall and have problems finding anything in the market that I don't find to be massively overpriced. Last year when I was trading CMG and selling puts weekly (pretty decent premium) I noticed that the float was shrinking but the short interest was the same. With only ~28M shares outstanding and ~4M short....this seems like it could have good potential to the upside. I got a little better trade placement by waiting but does not mean I won't get taken for a ride again, with earnings coming soon I will look to manage if the stock runs up a little into earnings or hope that IVR will stay high when/if it gaps down after earnings to help the roll. I probably should have waited and played the "after earnings" event but have been sitting on the sidelines this year with not many trades and need to take some risk in order to make some money.
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Well CMG never seems to disappoint? I was traveling when I first saw a $26 drop that was only $17 by EOD. I was not concerned since earnings are the 25th it did not seem to be a good time to adjust......the red line was where I was thinking of adding to the trade ~350ish. When videos of rodents were released and the stock continued to drop past my add point (so quickly) I decided this might be more of a deep dive and rolled out til Dec. I bought the put I sold for $9.20 back for $38.55 and sold the same 380 put Dec expiry for 48.84 which gives me a total credit of only $19.00 for a cost basis of approx. 360. If the stock drops after earnings I may add extra shares or write another put depending on how much capital I am willing to risk in this name. While I am still bullish CMG I would still like to get the best prices. CMG is currently 345.
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Defending this CMG position this morning by both rolling out in time and adding a put ratio spread. While I have heard some people say that rolling is actually locking in a loss, it also locks in the lower price the stock is trading at currently. If Chipotle is going to $250 I have to leave some cash to defend further then I will manage the ratio spread by closing the put debit spread portion for profit and roll the other remaining short 295 put out in time and maybe even down a strike if permitted (only for a credit of course). So I bought back my December 380 short put for 60.00 and sold the same 380 short put in March 2018 for 66.20 giving me an additional 6.00 of cost basis reduction putting me around 355 total. With implied volatility rank at 62% I am going into September with 36 days to expiry and selling 2 puts @ 295 strike for 3.84 each and buying 1 put @ 300 strike for 4.80. This will give me an approx. 2.65 credit *IF* Chipotle can stay above 300 for this more turbulent time of year but will give me 5.00 of cost basis reduction and whatever I get when I roll the remaining 295 put (assuming it continues to break down) where I will essentially be averaging down 100 dollars less than my initial 380 start point. This is in a 401 style account and looks like CMG will now be a long term holding at this point.
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With a short term bounce and volatility dropping a bit I closed the ratio spread this morning. I closed the short puts for .70 each (2) and the long put for 1.01 The above costs did not account for commissions.....all said and done net profit of 2.00 towards cost basis reduction bringing me to 21.00 with the current price of 320. Still have work to do.
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Sold a 290 put for Sept. monthly expiry (7 days) Implied volatility rank was 49% and premium received was $1.24. I would like to be able to stair-step this trade down as best as I can before averaging down on my second lot but would also like to have shares to be able to work the call side as well. Should we drop another 20 bucks or so I will have to weigh if taking the shares would be better or keep fighting as we fall to 250ish. I will definitely roll the 380 put out in time again if we break below 300.
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Closed the 290 put today for .85 cents (chickened out) With the stock behaving poorly and another report out that seems to have moved the stock, I would rather wait for earnings next month and accumulate the stock for better premium. 30% return is not bad for holding over the weekend but not sticking to my plan is a bigger issue. I seem to have conviction when price is falling and lack it when it recovers somewhat?!? While everyone else is making money shorting this name I am starting to think I might/should just let my risk ride and add when we get to 250.......not sure I am a good enough trader to attempt stair-stepping this down.
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Was supposed to be taking a break from trading....but open positions have been bothering me. When CMG fell sub 300 again I placed another put ratio, this time 285/280. Trade has already been closed for .95 cents of cost basis reduction and I closed prior to Fed just in case.
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With earnings on October 24 this will be a short dated trade. I am placing another put ratio spread on to defend my losing position. With 18 days to expiry the 280/290 put ratio spread was almost a scratch for .34 credit and fees of $24 round trip (Fidelity u suck!) I am widening out the spread this time to account for the gamma risk in the shorter duration trade and also factoring in that this is the 4th time CMG has tested the 300 level.......bound to breakdown here at this rate. As with the other ratio spreads I will look to take profit on the $10 wide debit spread portion of the ratio and roll the other short put @ 280.
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Holy Guacamole! Well I skipped earnings since the stock began to rally some, making the put ratio less worthwhile. I am already positioned long (short 380 put) So I figured why force it? Good thing. Problem is......now that the 380 short put is soooooo DITM there is nothing left to do. Mar. 103 - 106 and June 104 - 106 meaning with the lame liquidity I would only get a buck for 3 months time. I will place another put ratio but I am waiting for the shorts to reload and push this thing down some more for the next 2 days or so.
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The beatings will continue until morale improves........full court press defense this morning. I rolled the DITM short 380 put out all the way to Sept. 18 (Holly F) for a 3.50 credit (111 - 107.41 minus commish) I also added another ratio that is a bit more aggressive. With 50 days to expiry and a 57.8 Implied Volatility Rank of 57.8% I bought 1 265 put for 8.20 and sold 2 260 puts for 6.22 for a total net credit of 4.1 give or take a few cents for commissions. The last several ratio spreads I placed before were for smaller credits and most expired worthless (the last one did anyways) but as we approach the 250 mark I am thinking this would be a good place to make the final stand. Nobody can time these things perfectly and/or pick tops and bottoms. I have now reduced basis by 29.50 assuming full collection of last ratio and if it falls through the ratio I will get the debit vertical of 5.00 as well. Worst case scenario if I take the second lot at 260 would mean my cost average would be 302.75 with the stock at 250 probably will still be a substantial loss unless price recovers.
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With Chipotle up a bit today and only 30 days left (vol still pretty high @ 61%) the price action has made this trade closable for 1.35 for a net of 2.75 more of basis reduction. This gives me a 32.25 total so far......still a LONG way to go. I will wait for some better prices a.k.a. the next crisis to take a stand. I am feeling kinda feisty and actually wanting to take some shares so I can start selling calls as well as puts to help me fight back to even.
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Apologies for not updating this trade but it seemed as it may be an endless task at a certain point. I closed this short put for 6.75 on June 6, 2018 with only a couple other minor trade defense's made with put ratios (not listed here). Not going to brag or anything as this was an a*s whooping of the 1st order. I had considered defending and hedging this trade until Sept but my fellow Tasty Traders talked some sense into me as I had become dug in like a tick..........thank you.
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Trade Closed