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Call volume accelerated to two times the average daily rate in McDonald's Corporation's (NYSE:MCD) options pits yesterday. By the numbers, roughly 27,000 calls changed hands, compared to around 7,900 puts. Traders set their sights on MCD's short-term contracts, as evidenced by the stock's 30-day at-the-money implied volatility (IV), which jumped 11.9% to 11.4%.
More than half of the day's call activity centered on the September 95 strike, where 16,117 contracts were traded -- mostly at the ask price, hinting at buyer-driven activity. Plus, IV edged higher, and open interest soared overnight, pointing to the initiation of new positions.
By purchasing these calls to open, the speculators expect MCD to be sitting north of $95 at the close on Friday, Sept. 19, when front-month options expire. More specifically, they'll begin to profit on a move above breakeven at $95.62 (strike plus the volume-weighted average price of $0.62). Risk, meanwhile, is capped at 100% of the premium paid, should MCD fail to topple the strike price at expiration.
On the charts, McDonald's Corporation (NYSE:MCD) has struggled recently, due to food recalls in China and restaurant closings in Russia. Yesterday was the first session this month the stock toppled the $95 mark, before eventually settling at $94.44. Today, the equity is extending its retreat from this overhead area -- down 0.1% at $94.32 -- as traders digest another store closure in Russia and the company's re-evaluation of its relationship with OSI Group Inc. -- the firm behind this summer's tainted meat scandal.