MCD – McDonald’s Corp. – The world’s largest restaurant chain posted a 12% rise in second-quarter net income ahead of the opening bell this morning, recording profits of $1.13 a share, which just came in just above average analyst forecasts of $1.12 a share. Shares of the Big Mac-maker fell, however, slipping 3.00% to $69.26 by 12:30 pm (ET) today. One long-term bullish investor, hungry for a rebound and new 52-week high for the price of the underlying shares, appears to have taken advantage of the slight pullback in share price today by purchasing a plain-vanilla debit call spread in the January 2011 contract. It looks like the trader purchased approximately 1,500 calls at the January 2011 $70 strike for an average premium of $4.17 each, and sold the same number of calls at the higher January 2011 $80 strike for an average premium of $0.67 apiece. Net premium paid to establish the spread amounts to $3.50 per contract. McDonald’s shares must surge 6.1% over the current price of $69.26 in order for the call-spreader to start to make money above the average breakeven price of $73.50 by expiration day next year. Maximum potential profits of $6.50 per contract are available to the trader should shares jump 15.50% to surpass $80.00 by expiration.
Affiliation: Interactive Brokers
Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
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