The following is not financial advice. I pee in the shower…. AND in the bathtub.
Hi guys. Had some positive feedback on my IBRX post a month ago , and it motivated me to post about another idea I had for Chipotle and its 50-1 split trading next week. A 50-1 split is kinda rare. SP is going from 3300 ish to 65-70 bucks.
The record date for the split was the 18th , and the stock trades on the split basis on the 26th. I saw the stock was down almost 5% Thursday. I thought it was weird it was still trading at all if the record date for a split was the 18th…
I called Fidelity to ask about that since it seemed weird the stock was trading in the mean time and they were not gonna just say “ok your shares are 70 bucks now too bad”. The rep at Fidelity had to take some time to look as he said it was an excellent question! He came back after about 10 minutes and assured me as long as you own the stock by the 25th , you will get the split shares on open the 26th. Check with your broker to make sure but the following will work for Fidelity at least.
You could buy 2 shares of CMG on Monday or Tuesday. Will likely cost you around 6600-6700 depending.
On Wednesday CMG trades on the 50-1 split adjusted basis. You will now have 100 shares at 65-70 depending.
Sell a covered OTM call. Pick a strike at least 10% above the SP at open on the 26th.
So you pocket whatever premium and timeframe you are happy with , and wait. I am betting there will be at least 10% appreciation post split. Everyone loves Chipotle and it shows. The business is booming. So you will make money with premiums and share appreciation. If the shares get called , boo hoo. As long as your not too close to ITM when you sold the call the $ from the sale plus the premium should leave you with enough to rebuy 100 shares and sell another call. Rinse and repeat. After a bit you will see what you can pull out of it weekly/monthly without getting exercised too much. Then you use premiums for more shares till you have 200. Now you can sell 2 contracts at a time. See where I am going with this?
If you don't have the almost 7k to throw at this , you can also simply wait till the 26th and buy calls ATM or ITM at open. After something like a 50-1 split , I think it has a lot of upside for at least Thursday and Friday.
That's all I have right now. Thanks for reading my post! If anyone has anything to add I would love to see it in the comments. I think this is a pretty solid play but I am no expert so if anyone smarter than me sees something i missed please chime in.
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