Short Interest More Than Doubles on McDonald's Corporation (MCD)

Bearish sentiment has been increasing both in and outside of McDonald's Corporation's (MCD) options pits

by Josh Selway

Published on Jun 13, 2016 at 3:40 PM

Blue-chip stock McDonald's Corporation (NYSE:MCD) has stormed higher over the past year, gaining almost 31% over the past 12 months. The shares hit an all-time high of $131.96 last month and then pulled back, only to bounce from the round-number $120 level -- right near their year-to-date breakeven level -- and were last seen trading at $123.35. Despite this long-term outperformance, short interest on MCD stock shot through the roof during the most recent two-week reporting period. 

By the numbers, short interest on MCD more than doubled in the latest reporting period, increasing by 122%. This was the fourth largest increase of any stock in our short-interest database, according to Schaeffer's Senior Quantitative Analyst Rocky White. At MCD's average daily trading pace, it would now take short sellers more than four days to cover their positions. 

Interestingly, pessimism has also been building quickly inside the stock's options pits. In fact, MCD's Schaeffer's put/call open interest ratio (SOIR) has jumped to 1.68, which marks a 12-month high. This means options traders targeting contracts that expire within three months are more put-focused now than at any other point in the last year. 

Moreover, put buying has almost doubled call buying during the past 10 weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Specifically, MCD's 50-day put/call volume ratio of 1.91 ranks in the 92nd annual percentile. 

Most analysts are skeptical of MCD, too. Fourteen brokerage firms rate the stock a "hold" or worse, while 10 recommend buying it. As such, there are several areas in which bearish sentiment could shift and actually help McDonald's Corporation (NYSE:MCD), should the stock head back toward record-high territory. In other news, the fast-food company just announced it will be moving its corporate headquarters to downtown Chicago in 2018. 

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