Let Me Check My Calendars – CMG, INTC

by CC April 3, 2017 2:44 pm • Trade Updates

We have a couple of Bullish call calendars I wanted to check in on as in both cases the stock is now higher than the April short call strike. First INTC:

On March 14th we took a look at Intel (INTC) stock as the stock got hit on news of its nearly $15 billion bid for MobileEye (MBLY). Despite the pricetag, it was our thought that investors would come to appreciate the move as it fits with their moves to not miss out on the next big thing. Here’s some of what we said at the time:

What investors in the near term will have to grapple with is just how much they are overpaying for MobilEye, and now much they might have overpaid for Altera. That said if Nervana’s technology were to be able to augment or be embedded with that of Altera and or MobileEye than it might end up justifying the purchase price of the others.

I have no idea how this shakes out, but investors fairly muted response to the MBLY price tag (INTC was down at its lowest point about 2.5%) suggests that there is a sort of glass half full towards the new Intel.


if the acquisitions come together as management hopes and the company ends up being at the forefront of the AI/Autonomous Driving/ IoT platform emergence, then there is room as far as the eye can see to the upside

Since then, investors have indeed shaken off the price tag of the MBLY deal and not only has the stock recovered all of that gap lower, it is now breaking out above the resistance we identified in the original post. Here was the trade idea from March 14th:

selling near term to own farther out calls makes sense, defining risk while allowing for inexpensive upside for the second half of 2017:

INTC (34.75) Buy the April/Oct 36 call calendar for 1.25
  • Sell 1 April 36 call at .27
  • Buy 1 Oct 36 call for 1.52

With INTC now 36.15 and above resistance the original trade idea is now worth 1.40 vs the original 1.25. Since this is a longer term idea out to October, it makes sense to adjust here and make sure the short April call doesn’t take away from the overall bullish stance:


Buy to close the INTC (36.15) April 36 call for .55

Sell to open the October 40 call at .55

New Position – October 36/40 call spread for 1.25 (currently worth 1.40)


Now to Chipoltle (CMG). This post was titled E-Coiled Spring and in hindsight we probably didn’t appreciate how coiled it was as the stock has been up almost every day since the original post, an impressive breakout from consolidation. Here were our thoughts and the original trade idea, from March 28th:

the concentration of holders (the top 5 holders, including an activist, own about 45% of the shares outstanding) coupled with very poor investor sentiment (16.5% short interest and 9 buy ratings, 21 holds, and 5 sells with an average 12 month price target of $409, below where the stock is trading) sets up for a short squeeze on the slightest bit of unexpected good news, with the backdrop of an improving technical set up.

So what’s the trade?

Earnings fall days after April expiration and that offers an opportunity to sell April expiration calls to own May upside that captures the event:

CMG (424) Buy the April/May 435 Call Calendar for 7.00
  • Sell 1 April 435 call at 5
  • Buy 1 May 435 Call for 12

The stock is now 450 above our short April 435 strike. The original trade idea is slightly profitable but unless the stock were to pull back to 435 it’s trapped a little bit as it’s now short deltas. It’s worth $8, vs the original $7, but if it keeps going higher into April expiration not only are profits at risk but it could even become a loser. So the best thing to do here is to keep the trade on a tight leash, getting ready to roll the April strike if the stock comes back in a bit towards the 435 strike, but also be ready to close the trade entirely if the stock continues higher, making sure it doesn’t become a loser. If it pulled back a bit the trade would be in great shape, if it continues higher it’d be a real shame to get the direction right but have the wrong trade structure. We’ll hope to be able to roll with the stock a little lower, and keep 460 as a stop on the upside.