Options Brief: McDonald’s (MCD)

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.

About Andrew Wilkinson 1023 Articles

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.

Interactive Brokers: Interactive Brokers offers direct market access to around 80 electronic global markets from a single account. Successful traders and investors understand that superior technology and lower trading costs can result in greater returns. For 32 years we have been building direct access trading technology that delivers real advantages to professionals worldwide. With consolidated equity capital of US $4.4 billion, IB and its affiliates exceed 1,000,000 trades per day. In addition, our prudent and conservative risk policies make Interactive Brokers a safe haven for your money. Discover some of the reasons why IB, the largest independent US broker/dealer, is the professional traders' and investors' choice.

Visit: Interactive Brokers

Be the first to comment

Leave a Reply

Your email address will not be published.