$CMG volatility belies the stock price

$CMG volatility is very low


With VIX at 12.54 there is little to write about from a volatility point of view in the broader market.  There is the potential for a binary switch as the Chinese trade talks could go well or not so well.  With most emerging market stocks down for now it looks like not so well.  There is real potential for a move as US equities get there is giddy off to the races move early and then some barrage of tweets ends up shutting down the rally.  The horse is at the gate but it can’t get out.  A horse that is out of the gate is $CMG.

I posted a binary-type trade idea in our Volatility Newsletter this morning.  If you like my commentary in the blogs I produce daily actionable ideas there.  You can subscribe to it here.  There is another volatility opportunity in a name that has gotten a lot of press in the last couple of years and that name is $CMG.  It popped up while I was teaching a class this AM and I blinked because the last time I looked at it the stock was trading for $340 and this year it traded $240.  That is near a double from the lows.

Charts by Cboe Livevol  Pro

Most of that giddy movement has near crushed the volatility in $CMG.  The company has had a host of quality control problems and the current market value is priced for perfection.  So is the IV in the options.  In a few weeks Option Pit will give our Options Made Easy series of classes. The whole idea  is to get traders to understand how the basic option strategies function under different volatilities.  This helps determine trade selection to increase odds of success and payout.  What does this have to do with $CMG?

$CMG has a recent history of sharp moves and the volatility market says there won’t be one.  I am not so sure that is correct, The lower IV also generates a steeper put skew which helps with trade selection.  You can have an opinion on where $CMG is going but a better idea might be where $CMG volatility is going with the stock going anywhere.  That is something to learn.

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