Option Bulls Bet On Higher Highs for McDonald's Corporation (MCD)

The negativity surrounding McDonald's Corporation (NYSE:MCD) could actually help it hit new highs

Nov 10, 2015 at 3:10 PM
facebook X logo linkedin

McDonald's Corporation (NYSE:MCD) CEO Steve Easterbook earlier announced some major news for shareholders. Specifically, while unveiling details of the burger chain's turnaround plan, Easterbrook stated the company will not pursue a real estate investment trust (REIT). The shares were halted ahead of the announcement, but have since resumed trading to add 1.4% at $114.28, and earlier hit an all-time high of $114.99. Even so, it looks like some traders are betting on MCD to reach another technical milestone by week's end. 

Specifically, buy-to-open activity has been detected at the blue chip's weekly 11/13 115-strike call, meaning speculators are expecting fresh all-time highs before the contracts expire at the close on Friday. However, even if MCD fails to top $115 by week's end, the most these traders stand to lose is the initial premium paid. It should be noted that premium on short-term options is somewhat inflated right now, according to the security's Schaeffer's Volatility Index (SVI) of 29%, which tops more than four-fifths of readings from the previous 52 weeks. 

Interestingly, while the shares have been edging northward in November, pessimism has also been on the rise. First of all, MCD's 10-day put/call volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) of 0.84 is higher than 73% of readings, going back one year. This means put buying has been faster-than-usual of late. The stock's Schaeffer's put/call open interest ratio (SOIR) reveals similar behavior. At 0.81, this reading is currently higher than 99% of all others from the past year, revealing MCD's short-term speculators are extremely put-skewed. However, given MCD's technical backdrop, it's possible recent put buyers are simply shareholders hedging against an unexpected downturn

Meanwhile, bearish betting is occurring outside the options arena. During the two most recent reporting periods, short interest on the equity increased by 16%. This surge puts MCD short interest at an eight-year high.

Despite the equity's technical strength -- and knack for knocking out new highs -- there is one indicator working in the bears' favor. MCD's 14-day Relative Strength Index (RSI) stands at 72, meaning the stock is now overbought, and potentially due for a pullback. However, if the stock continues to move higher, all this negativity could unwind, pushing the shares higher.

In other news, fast-food workers across the nation are striking for a $15 minimum wage. Also, within the past hour, S&P announced it has slashed its credit rating on McDonald's Corporation's (NYSE:MCD) to "BBB+," citing the restaurateur's plans to return $10 billion to shareholders, which includes an increased quarterly dividend.

Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on C3.ai calls
238.5% GAIN on Oracle calls



Rainmaker Ads CGI