Chipotle Mexican Grill, Inc (CMG) operates 1,230 restaurants in the United States focusing on a menu of burritos, tacos, and salads. The company’s stock is currently trading around $439.50 in a 52 week range of $233.82-$447.65. The stock has been outperforming the market this year, rallying nearly 48% year to date and nearly 52% in the past 12 months. CMG is set to report their most recent quarterly earnings today after the bell. Historically, CMG is a strong performer on earnings day. The stock has rallied 5 of the past 8 quarters with an average move of 9.4%. CMG also looks very strong on a chart. The stock is trading well above the Ichimoku Cloud and is just off of its 52 week highs. With strong technical and strong historical performance we believe CMG sets up well for a long ahead of earnings. Currently the options market is implying a $26.50, or 6%, move in CMG by tomorrows close. Using this implied move we calculate an upside target of $466.50 for tomorrow’s close. With this target in mind we can now set up a trade.
Trade: Buying the CMG Oct 455-465 Call Spread for $3.00
Risk: $300 per 1 lot
Reward: $700 per 1 lot
Breakeven: $458.00