Almost two weeks ago I wrote about Chipotle (CMG) and put an order in for when/if it pulled back. This is one where I am very happy to have been patient. CMG is down over $9.00 from its high and dropped over $4.75 before noon today and on its way down, when at 98.75, my limit for one September 90 naked put (CMGUR) hit and I received $289.25 after commissions. CMG is off its morning lows now, but still below where I traded. I was able to sell well OTM on CMG and still received a nice premium due to the implied volatility being 51.39 for this strike.
When I placed my order I was banking on pull back from the gap up it had after earnings, but it kept climbing. I held back on my urge to jump in and left my limit alone. The chart looked like it would pull back to the mid-90s and with so much volatility I decided not to try to cut it too close and aimed for the 90 strike at $3.00. It passed that by $0.38 to trade as high as $3.38. I wasn’t watching at the time and I’m not sure if the big/ask got any higher than that. If CMG doesn’t fall much more I’ll be pretty happy with my charting on this one. I drew a second trend line on the same chart that showed another potential support line around 90 and climbing. With the premiums as high as they are now, I don’t feel like I’m in too much danger of this being a losing position as I will be able to sell a covered call with a solid premium if it does fall ITM at expiration.
Click on the thumbnail for the full sized chart:
On another note, my AET calls are close to worthless now. I saw it trade at 0.55 yesterday, .05 from my limit order to sell. That’s how close it can be sometimes. The difference in making $100 and losing $100. Assuming nothing changes in the next three days on it, I’ll be 1 for 2 on my call buying trades lately. What I’ve learned from this one is to not try to be so greedy and go for a smaller win. Since I’m close to break even on my call buying I’ll keep trying until I figure out what works for me or find that it’s not my type of trade to make.
I didn’t plan to be this busy today and make three trades, but my limits are hitting as the market slides. Luckily I’m “working” from home and have more time to not actually pretend to work…
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