Blue-Chip Fast Food Stock Gears Up for Q4 Earnings

The security currently sports attractively priced premiums

Assistant Editor
Jan 26, 2021 at 2:47 PM
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Blue-chip McDonald's Corp (NYSE:MCD) is preparing to report fourth-quarter earnings and revenue before the bell on Thursday. Ahead of the event, analysts expect the fast food titan to post earnings of $1.78 per share, as well as rise in year-over-year revenue thanks to efforts that ensure customers have low-contact ways to dine during the Covid-19 pandemic. 

At last check, MCD shares were higher, up 0.6% at $214.55. The equity added 15.4% over the last nine months, though the 80-day moving average has kept a lid on most rally attempts. Meanwhile, the $208 level has contained any sharper pullbacks during that timeframe.

MCD Chart January 26_2

Digging deeper, McDonald's stock has moved lower after five of its last eight earnings reports, including a 5% drop in October of 2019. On average, MCD experienced a post-earnings swing of 1.5% over the past two ears, regardless of direction. This time around, the options market is pricing in a bigger-than-usual move of 3.8%.

As far as sentiment is concerned, it looks like the MCD's options pits are bullish. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security has racked up a 50-day put/call volume ratio of 2.49, which stands  in the 89th percentile of its annual range. In other words, options buyers have been initiating bearish bets  at a faster-than-usual clip during the past ten weeks.

Now looks like a good time to speculate on McDonald's stock with options, too. This is per the equity's Schaeffer's Volatility Index (SVI) of 25%, which sits in the relatively low 15th annual percentile of readings from the past year. This reveals that low volatility expectations are being priced into near-term contracts -- a boon to potential buyers.

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