With all of the fear-inducing headlines we see on the daily …
It can be hard to keep them all straight!
Although fears about the delta variant have consistently dominated the headlines over the last several months …
Not everyone seems to be paying attention – at least as far as share prices go!
(No, I’m not talking about meme stocks … even though I did just grab a +231% win in Support.com (Ticker: SPRT) using my Gamma Radar in my Robinhood Trader program …)
While some sectors have struggled against delta-induced headwinds, others seem to be saying “COVID who?”
Here’s three “reopening” names that seem immune to the continued pandemic fears.
Chipotle Mexican Grill
I’m not totally shocked to see Chipotle Mexican Grill (Ticker: CMG) continue to hold its own in the wake of the COVID pandemic.
After all, Chipotle customers have proven time and time again they’re not afraid of getting sick …
But the chain has stepped up its emphasis on digital ordering, and it’s proven to be successful.
Let’s be real – people aren’t choosing Chipotle for the in-restaurant atmosphere, anyway.
CMG recently reported that in-person sales have recovered 70% of their pre-pandemic level, and their booming digital business is helping the chain make up the difference. The store opened more than 50 new locations last quarter, with many including a drive through “Chipotlane” to encourage carryout dining.
The shares have steadily recovered since their 2020 pandemic plunge, and even as delta variant fears weighed on other “re-opening” industries, such as travel and oil stocks, CMG has managed to maintain its upward jaunt, even gapping higher after its latest earnings report.
Chart courtesy StockCharts
In the options pits, however, open interest is slightly more put-skewed than usual, with 1.3 puts brought to open for each call option.
Though, the top two open interest positions for the fast food chain are the December and January 2022 2300-strike calls, so it seems at least a few options traders are expecting quite a bit of upside from CMG’s current perch at $1,918.
Another restaurant name shaking off the delta downturn is Darden Restaurants (Ticker: DRI). The company owns popular chains including LongHorn Steakhouse, Red Lobster, and Olive Garden, which unlike Chipotle, are not generally thought of as “carryout focused.”
Nevertheless, the restaurant behemoth has solidly shaken off the pandemic downturn, and the shares have continued to climb higher even as delta concerns have weighed on other re-opening gainers.
Chart courtesy StockCharts
Carryout demand has been higher than expected, and foot traffic picked up significantly as lockdown restrictions eased. Interestingly, the restaurant stock did not comment on the effects of labor shortages or higher food costs during its latest earnings release, setting it apart from its competitors.
In the pits, traders don’t seem to be entirely optimistic, with call open interest in the bottom 8% of its annual range.
However, while puts do outnumber calls, it’s only at a 1.7-to-1 ratio, suggesting that while options traders may be more put-skewed than usual, it isn’t an overwhelming majority.
As far as the specific contracts traders are gravitating to, DRI’s top open interest contracts are the out-of-the-money September 135-strike and 120-strike puts, followed by the much more near-the-money September 155-strike call.
MGM Resorts International
Gambling is another “reopening” luxury that seems to be immune to the delta variant blues …
Or at least as far as MGM Resorts International (Ticker: MGM) is concerned!
The casino and hotel stock has solidly shaken off the pandemic, and while the shares did hit a summer slump — perhaps in part due to delta fears and headwinds facing the travel industry — they have since recovered, and continued their surge higher.
Chart courtesy StockCharts
However, it may not all be in-person traffic keeping MGM afloat.
Aiding in MGM’s recovery is its sports betting and iGaming applications, BetMGM, which is capitalizing on recent online gambling tailwinds.
Hopes of further post-pandemic upside are also helping to push the shares higher — I guess they’re counting on foot traffic to pick up once people can no longer hide their poker face behind a mask!
More recently, news of Macao’s reduced travel restrictions acted as a sector-wide boon — causing casino companies around the world to say “jackpot!”
In the options pits, calls slightly outpace puts at a 1.1 ratio, and the January 2022 40-strike call holds the highest open interest of any MGM contract.
Interestingly, options traders seem to be steering clear of the casino giant, with open interest in just the 12th percent of its annual range.
Of course, now would seem to be the time to take a gamble on MGM options, at least from a volatility-pricing standpoint. MGM’s 30-day at-the-money implied volatility is in just the third percent of its annual range, suggesting options are almost the cheapest we’ve seen them in the last 52 weeks.
The moral of the story?
Come COVID or high water, people will continue to need their burritos, bread sticks, and blackjack!
Finding good leverage on any of these names could make for an interesting bullish play.
Or if you’d like me to find the leverage for you …
Your Only Option,