McDonald's Corporation (MCD) Option Traders Hungry for Triple Digits

McDonald's Corporation (MCD) front-month calls are active today

by Andrea Kramer

Published on Mar 2, 2015 at 1:18 PM
Updated on Apr 20, 2015 at 5:32 PM

McDonald's Corporation (NYSE:MCD) is enjoying broad-market tailwinds, with the shares exploring triple-digit territory for the first time since July. In the options pits, speculators are gambling on the blue-chip restaurateur to extend its journey higher in the short term, with calls more than doubling puts, and trading at twice the average intraday clip.

The stock's 30-day at-the-money implied volatility has jumped 13.9% to 20.5%, underscoring the growing appetite for near-term contracts. Garnering notable buy-to-open attention are the March 99.50 and 103 calls, the latter of which is the most active contract on the day. By purchasing the calls to open, the buyers expect MCD to muscle north of the strikes through options expiration at the close on Friday, March 20. MCD hasn't toppled $103 since mid-May.

However, the equity -- last seen 1.3% higher at $100.17 -- sports a 14-day Relative Strength Index (RSI) of 69, on the cusp of overbought territory, and the shares could run into a roadblock in the $100-$102 region. This area provided support for MCD shares from April to July 2014, but could now switch roles to serve as resistance. Plus, the March 100 strike is home to significant call open interest in the front-month series, with more than 32,500 contracts outstanding. This heavy accumulation of calls could reinforce resistance in the round-number area.

In fact, McDonald's Corporation (NYSE:MCD) option traders have grown increasingly bullish during the past 10 weeks. The stock's 50-day call/put volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits at 2.57 -- in the 82nd percentile of its annual range. However, the stock's Schaeffer's Volatility Scorecard (SVS) of 26 indicates that MCD has tended to make undersized moves during the past year, relative to what the options market has priced in.

Daily Chart of MCD since April 2014

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