The Story Behind Chipotle Mexican Grill's (NYSE:CMG) Volatile Stock Price

Options Market Insights: What's Behind the Chipotle Mexican Grill (NYSE: CMG) Rally?

Options traders are often seen as contrarian indicators of market sentiment, and the recent activity in Chipotle Mexican Grill (NYSE: CMG) options contracts suggests that the restaurant chain's impressive rally may be more than just a fleeting phenomenon.

According to data from Benzinga Pro, the options market is pricing in a significant upside move for CMG in the near-term. The 50-day and 100-day moving averages have both been breached, and the stock's relative strength index (RSI) is indicating overbought conditions.

Despite this, the options market is not pricing in a significant pullback. The 10-day and 20-day historical volatility (HV) metrics are both trending lower, indicating that market participants are becoming less concerned about CMG's short-term price action.

One of the key drivers behind the options market's optimism is the increasing popularity of CMG's digital ordering and delivery services. In a recent earnings call, the company highlighted the success of its Chipotle app, which has seen a significant increase in downloads and transactions.

The options market is also pricing in a potential catalyst in the form of CMG's upcoming quarterly earnings report. The company is expected to report its Q2 earnings on July 21, and options traders are pricing in a significant move in the stock price around that time.

While the options market is not pricing in a significant pullback, it is worth noting that the stock's technical indicators are indicating overbought conditions. The RSI is above 70, and the stock's MACD (moving average convergence divergence) is indicating a buy signal.

In terms of specific options trades, the August $800 call options are seeing significant buying interest, with volume and open interest both trending higher. This suggests that options traders are betting on CMG's stock price continuing to rise in the near-term.

Overall, the options market is suggesting that Chipotle Mexican Grill's recent rally is more than just a fleeting phenomenon, and that the company's digital ordering and delivery services, as well as its upcoming earnings report, are likely to be key drivers of the stock's price action in the near-term.