Chipotle Mexican Grill (CMG) On Investors Observer Volume Leaders List With Bearish Technicals

Posted: Friday, November 06, 2009 9:18 AM EDT
By: Market Intelligence Center Staff

Chipotle Mexican Grill (NYSE: CMG) closed yesterday at $85.86. So far the stock has hit a 52-week low of $36.86 and 52-week high of $98.66. Chipotle Mexican Grill stock has been showing support around 82.02 and resistance in the 87.78 range. Technical indicators for the stock are Bearish and S&P gives CMG a neutral 3 STAR (out of 5) hold rating. CMG appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 85 covered call (CMG AQ) for a net debit in the $80.96 area. That is also the break even stock price for this trade. This covered call has a 71 day duration, provides 5.71% downside protection and a 4.99% assigned return rate for a 25.65% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the CMG Jan '11 40 Call (XGL AH) and selling the Jan '10 85 call (CMG AQ) for a $41.10 debit. The trade has a 71 day life and would provide 5.54% downside protection and a 9.49% assigned return rate for a 49.00% annualized return rate (for comparison purposes only). Chipotle Mexican Grill does not pay dividends at this time. [FBB-Seven Summits Research]