CMG reports Q3 earnings tonight and the Implied move in the options market is about 7% vs the 4 qtr avg move of about 6%.
This stock is officially on my “Banned” list but many of you of asked how I would Play…..Obviously I will never buy this stock and would look for low premium ways to get short exposure……Here’s a possible trade
I guess into tonight’s event if you had to play I would consider Put Butterflies….
I would look at $15 wide flies that could get the stock back to about 285, the 200 day moving average or down about 7% with the stock at $307.
Technically the chart looks toppy to me, even-though it appears to be making a decent base with a series of higher lows since late August….or it could be the making of a head and shoulders top….[caption id=”attachment_5593″ align=”aligncenter” width=”300″ caption=”1 Yr [/caption]
TRADE I would Consider If I had to Play Earnings and Want to Be Short….
CMG $307 Buy Oct 300/285/270 Put Butter Fly for 2.50
Buy 1 Oct 300 Put for 6.60
Sell 2 Oct 285 Puts for total of 5.30 (2.65 each)
Buy 1 Oct 270 Put for 1.20
Break-Even On Oct Exp:
Profits Btwn 297.50 and 280 make up to 17.50
Losses btwn 297.50 and 300 and btwn 270 and 272.50 up to 2.50 and lose full 2.50 above 300 and below 270
***I Just Paid 2.50 for the is fly for a small position….But this is not a high conviction idea…..
As ALWAYS REMEMBER TO USE LIMITS IN MULTI LEG TRADES LIKE THIS, THE BID ASK IS VERY WIDE..
ALSO THIS TRADE IS OF THE HOTEL CALIFORNIA VARIETY, ONCE YOU ARE IN, YOU MAY NOT BE ABLE TO GET OUT WITH 1 DAY TO EXPIRATION, SO RISK WHAT YOU ARE WILLING TO LOSE.