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The fallout from the McDonald's Corporation (NYSE:MCD) expired-meat scandal continued yesterday, as the restaurateur announced it has pulled Chicken McNuggets from its Hong Kong locations. Nevertheless, that didn't prevent one group of option bulls from targeting intermediate-term gains in the stock.
Diving right in, MCD's most active strike by far on Thursday was the out-of-the-money October 100 call, where more than 3,800 contracts were exchanged. The majority traded at the ask price, and open interest added nearly 3,000 positions overnight, hinting at newly minted bullish bets. By purchasing the calls for a volume-weighted average price (VWAP) of $0.56, the speculators are banking on MCD shares to topple breakeven at $100.56 (strike plus VWAP) by October options expiration. Additional gains will accrue north of here, while risk is capped at the initial premium paid, should the stock finish below the strike at expiration.
On the charts, McDonald's Corporation (NYSE:MCD) has been tumbling since mid-May, when the shares hit an all-time high of $103.78. Of course, this downtrend has only intensified in recent sessions, due to the aforementioned scandal, as well as Tuesday's second-quarter earnings miss and subsequent bearish brokerage attention. However, the shares are little changed this morning, off a penny at $95.34.