r/thetagang
Why I'm selling a CMG put instead of buying the stock today
Author sells a $CMG cash-secured put to buy shares at a lower cost, citing strong fundamentals, pricing power, and reasonable valuation.
- Strong brand with pricing power and long expansion runway via chipotlanes.
- Consistent revenue and earnings growth with a reasonable 26x forward P/E.
- Selling cash-secured puts provides premium income and a lower break-even price than buying shares outright.
- Same-store sales growth has slowed down to historical figures.
- Investors will still face unrealized losses if the stock drops significantly below the $27.60 effective cost basis.
I've been looking at Chipotle ($CMG) and instead of buying shares outright, I'm considering selling a cash-secured put.
\* CMG is trading around $32
\* June 2027 $32.50 put is trading around $4.90
\* If I sell the put, I collect $490 per contract today
\* If assigned, my effective purchase price becomes roughly $27.60 ($32.50 strike - $4.90 premium)
\* Strong brand with pricing power
\* Long runway for restaurant expansion (chipotlanes)
\* Consistent revenue, earnings growth & same store sales (which is currently down to historical figures)
\* Forward P/E around 26x, which doesn't look excessive for a business expected to compound earnings at double-digit rates
The stock has also found support around the $30 area multiple times over the past year, although I place more weight on the fundamentals than the chart.
By selling the put:
\* Best case: CMG stays above $32.50 and I keep the entire premium.
\* Worst case: I get assigned a business I already wanted to own, at an effective cost basis near $27.
If CMG drops significantly below $27, I'll still have unrealized losses just like any shareholder.
The main difference is that my break-even is lower than if I bought shares today.
For those who sell cash-secured puts regularly, would you rather:
- Sell a longer-dated ITM put and lock in a lower effective entry price, or
- Sell shorter-dated OTM puts repeatedly and collect premium more frequently?
That’s a really long time to lock up capital. You’re better off looking around the 45 DTE range since that’s when theta starts to decay more rapidly.
The trade logic is fine but the tenor is doing most of the damage to your return. That June 2027 put is roughly 18 months out, and the bulk of theta on a put that far out does not start working for you until the last 90 days or so. You are collecting $490 to sit short a year and a half of mostly extrinsic value that barely moves in the first year.
Run the annualized math. $490 on $3,250 of collateral is about 15 percent if it expires worthless, but spread over 18 months that is closer to 10 percent annualized. A 30 to 45 DTE put at a similar delta, rolled, pulls far more premium per unit of capital per year and lets you reset the strike as price or thesis moves. You are also locking in todays IV for 18 months, so if vol pops later you cannot take advantage of it.
If the real goal is just owning CMG cheaper, the long dated put does get you there. Just know you are paying for that one fixed entry with a lot of capital efficiency and flexibility.
Seems like OP put a lot of thought into his wall of text.
I would like to be able to reach the same conclusion for your wall of text. However I’m given pause due to your saying “June 2027” is 18 months out.
What causes you to believe this? Are you unable to count, unable to read a calendar, unable to spellcheck, some combination, something else entirely?
More importantly: why should I spend my valuable time on this planet reading a due diligence comment from someone who cannot even be trusted to speak factually about the date?
Looking forward to your response and (possibly) reading the rest of your wall of text
It's a bot post, AI is notoriously bad with numbers.
My thought exactly what a maroon
lol
Your premium will be taxed as short term no matter your DTE. What will make it long term is if you get assigned and hold the stock for a year.
I'm from Belgium so it only gets taxed when the option gets assigned to me. Otherwise the premium is tax free. The new regulations here are still in its early days
¿No es mejor hacer una put write? Puedes comprar las acciones e ir haciendo ventas de covered call muy OTM de manera recurrente e ir bajando así el precio medio de compra
The two structures answer different questions. The long-dated put is a commitment to own CMG at $27.60 with a year of carrying cost wrapped in. The short-dated OTM repeated path is an active income strategy. Pick based on actual thesis. If your thesis is "I want CMG long-term" (which is what your fundamentals point to), the long-dated put does what you want. Effective entry $27.60, premium yield roughly 15% annualized on the committed capital ($490 on $3250 over a year). If your thesis is "harvest premium and accept CMG as collateral," shorter-dated OTM wins on yield. A 30 DTE ATM-ish put might collect \~$1.00-1.20, which annualizes to roughly 40% on the same committed capital. The cost is active management and assignment risk you have to actually want. One nuance: theta is non-linear. Daily decay is steepest in the last 21-30 DTE. Selling long-dated options gives up most of that curve. You collect more total dollars but a smaller fraction of the available theta per day. That's why "sell 30-45 DTE and roll at 21" is the canonical TastyTrade style approach. Your post reads like the first thesis (you want to own the business). The long-dated put is consistent with that. Just call it what it is, a deferred purchase trade with premium attached, not a wheel.
Shorter-dated. Why not buy 100 shares and sell covered calls?
CMG will be taking off soon
the long-dated put answers a different question than the rolling strategy does. if you actually want to own cmg at $27.60 and youre fine waiting a year to find out, the single put is cleaner - one decision, no monthly re-underwriting. rolling 30-45 DTE is better premium per dollar but it also means youre re-deciding every month whether you still want the assignment risk, and thats where discipline leaks.
Short dated OTM. I do like selling long DTE calls on certain things though.
It will go to 40 in couple of hours if not minutes