Trade Update – the Burrito

One of the current earnings trades that I have on is with $CMG (Chipotle Mexican Grill). I did a review of the trade here and a recent update here. I received a few questions this weekend on the trade so I thought I would provide more details here on where it stands.

Here are the current pieces to the trade:

  • I covered the balance of the short stock portion on 11/1 (Thursday last week)
  • November 230/240 Bear Collar (now R/R). I am short the November 230 Put and long the November 240 Call
  • Short the 270 Call for $5.30 on 11/2 (Friday) to create a 240/270 Call Spread now
  • Used some of the proceeds to go Long the November 9w 265 Put

When you have a long position with a Collar, and then you close out the stock portion of the trade, the Collar becomes a Risk Reversal trade. In this case, a Bullish Risk Reversal as I am long a Call spread. Because I am short the 230 Put “naked” now, I wanted to have some protection into this week so I bought the weekly 265 Put so that I can have time to address the trade when I want to.