Another trade on Chipotle Mexican Grill (CMG)

On August 4th we sold August $350 Puts on Chipotle (CMG) and those options expired worthless and we kept all of our premium, which was $55 per contract. This trade was executed before Bill Ackman of Pershing Square took a position in the company betting that there is upside in the stock and that it is undervalued today. While we would agree with his assessment, we also are in a defensive mode considering the election and recent pull back in the market and wouldn't be willing to go long the stock here. However, we see another opportunity to sell Puts since the stock has recently pulled back from $440 to around $397 in the last 2 weeks.

We are selling the November $325 Puts for $2.50, and these options expire in 59 days. Pocketing $250 per contract if the stock remains above $322.50 is a highly probable scenario, and even if it was to drop to that level, we'd be glad to own the stock at that price, however, that seems to be a remote possibility unless markets melt down across the board, or there's another Ecoli-like epidemic at the restaurant chain. Selling puts on this stock almost $75 out of the money and getting paid $250 is a nice premium.