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Option Trends: McDonald's Corporation and Campbell Soup Company

Long puts have been popular on underperforming MCD and CPB

by 3/20/2014 12:07:14 PM
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Speculative players are opting to bet against food-and-beverage heavyweights McDonald's Corporation (NYSE:MCD) and Campbell Soup Company (NYSE:CPB), per data from the major options exchanges. Traders have recently scooped up long puts on these names, which have both been struggling to make any headway on the charts.

Traders at the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE) have bought to open 8,245 MCD puts during the last week compared to just 2,033 calls, resulting in a five-day put/call volume ratio of 4.06.

Expanding the scope to look at two weeks of trading -- and including data from the NASDAQ OMX PHLX (PHLX) -- yields a 10-day put/call volume ratio of 1.55, which is 1 percentage point shy of a bearish annual peak. In short, long MCD puts have hardly ever been in greater demand over the past year (relative to long calls).

Weekly chart of MCD since March 2013

This trend is also reflected in the equity's Schaeffer's put/call open interest ratio (SOIR) of 1.04. In other words, put open interest for options expiring in the next three months outweighs call open interest by a narrow margin. What's more, given that the ratio stands in the 98th annual percentile, short-term options players have rarely been more put-focused on McDonald's Corporation (NYSE:MCD).

MCD has been rather anemic on the charts of late, so this bearishly minded options speculation isn't a stretch. Perched at $96.65, the stock is staring up at round-number resistance at the $100 mark, and is also sitting within 2% of its year-over-year breakeven level of $98.40 (the stock's closing price on March 19, 2013).

Trading at $44.08 at last check, CPB is in a similar technical boat, also sitting within a chip shot of its March 19, 2013 close of $42.19. In 2014, the stock has gained an uninspiring 1.8%. Put buyers aren't hoping for a recovery in the shares anytime soon, and have scooped up 1,685 bearish bets during the last week, compared to a scant four calls. The resulting five-day put/call volume ratio stands at a staggering 421.25. The 10-day ISE/CBOE/PHLX put/call volume ratio of 9.90, meanwhile, is at an annual peak.

Skepticism toward Campbell Soup Company (NYSE:CPB) can also be found on Wall Street, as just one of the 15 analysts following the stock have deemed it worthy of a "buy" rating. What's more, short interest accounts for 8.1% of the stock's available float, and it would take more than a week of trading (at Campbell Soup's average daily volume) to close out of all of these bearish bets.


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