Traders React as Restaurants Try to Shake Things Up

Yum! Brands, Inc. (NYSE:YUM), Starbucks Corporation (NASDAQ:SBUX), and McDonald's Corporation (NYSE:MCD) are innovating to lure new customers

by Alex Eppstein

Published on Sep 15, 2015 at 10:39 AM
Updated on Jun 24, 2020 at 10:16 AM

Competition among restaurants for new customers is unrelenting, and strategies for luring diners seemingly change from week to week. Recently, several prominent chains announced they are expanding their menus or making them more accommodative. Here's a look at some recent changes at Yum! Brands, Inc. (NYSE:YUM), Starbucks Corporation (NASDAQ:SBUX), and McDonald's Corporation (NYSE:MCD), as well as expectations in the options pits.

Sparking this discussion is today's announcement that Taco Bell -- owned by YUM -- will begin serving alcoholic drinks at select "Taco Bell Cantina" locations. The first will open in Chicago one week from today, which will be followed by another later this month in San Francisco.

The news is doing little to help the shares, with YUM last seen 0.4% lower. Longer term, though, the stock has advanced 10.7% year-to-date at $80.66, and is currently consolidating atop its 10- and 20-day moving averages. Option traders are hungry for gains, per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Specifically, Yum! Brands, Inc.'s 10-day call/put volume ratio of 3.34 ranks in the 82nd annual percentile.

Along similar lines, SBUX has been expanding into the beer and wine markets, applying for liquor licenses for hundreds of locations throughout the U.S. Select locations have already begun serving alcoholic drinks, under a program dubbed "Starbucks Evenings."

Technically speaking, the stock has managed to stay afloat amid the broad-market choppiness -- and that's putting it lightly. In fact, SBUX has soared 37% year-to-date at $56.29, and is a chip-shot from its record high of $59.32 from early August.

This may have option bears feeling the heat. Starbucks Corporation's 10-day ISE/CBOE/PHLX put/call volume ratio of 1.50 sits just 6 percentage points from a 12-month peak. A capitulation among these pessimists could result in tailwinds.

Finally, MCD will begin serving breakfast all day long starting Tuesday, Oct. 6, in an attempt to boost sagging sales. In fact, the change has already taken effect in Northeast Ohio.

On the charts, McDonald's Corporation has advanced a modest 3.6% in 2015 to trade at $97.09 -- but is less than 5% from its record high of $101.88, touched in mid-August. Meanwhile, option traders have been betting against the stock, per its 10-day ISE/CBOE/PHLX put/call volume ratio of 0.77 -- which outstrips four-fifths of comparable readings from the past year.

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