CMG Calendar Call Spread Targets 455% Return

Chipotle Mexican Grill The shares have been in a steady uptrend since January 12, based on CMG moving averages. Setting up this calendar spread with strikes at $2980 gives you a bullish bias to tap into CMG stock's strength.

In this scenario, the optimal stock price for the option strategy would be $2980.00 on the date of the first expiration, April 26, 2024. This is equal to the strike price of the options in the spread. Since CMG is in a technical uptrend currently, and the strikes are above the current stock price of $2882.04, the spread is taking advantage of the stock's upward momentum. If the stock price is $2980.00 at expiration, we can benefit from the 26-Apr-24 call, which we sold, expiring worthless, and the option that we are long, the 17-May-24 call, will still have time premium built in.

Since we do now know what the exact implied volatility will be on April 26, we can use our historical data to make an educated estimate to help us calculate the value of the 17-May-24 option. Applying the median historical implied volatility of 28.6 from similar options, the theoretical value of the call is 87.35 at the date of the 26-Apr-24 expiration. Using the above assumptions gives us a potential upside of +455% for this calendar spread.

We actually saw a nice move above 3000 on 20-Mar-24. with the recent announcement of a 50 for 1 stock split. The stock has retraced since to beignets next leg up.

Happy Trading! Risking 1,500 to make 6,918. We will start with 12 contracts and slowly sell as it goes up. Risking 18K to make 83K.

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