McDonald's Corporation (MCD) Calls Active On Franchise Chatter

McDonald's Corporation (MCD) calls are hot on reports of a $400 million franchise agreement in the works

by Celeste Taylor

Published on Oct 5, 2016 at 11:40 AM
Updated on Oct 5, 2016 at 11:41 AM

McDonald's Corporation (NYSE:MCD) is following the broader stock market trend higher today, with gains fueled by reports that MCD is in talks with Saudi Arabia's Reza group to sell 20-year franchise rights for Singapore and Malaysia outlets for up to $400 million. The fast food behemoth is trading 0.4% higher at $113.97 so far today, with call options more active than usual.

MCD has experienced a series of lower lows since hitting an all-time high of $131.96 in May, giving up roughly 13% in the process. However, the shares seem to have found a potential floor at the $114-$115 mark since August -- a region which previously acted as support in late 2015 and early 2016, and is now home to the shares' 320-day moving average.

161005MCD

In the option pits, MCD calls are crossing the line at more than 1.5 times their average intraday rate. Meanwhile, put volume is on pace to end lower than 87% of all other readings from the past year. Of today's 10 most active options, eight are weekly calls expiring within the next two weeks. The weekly 10/7 114-strike call leads today's most active options, followed by the weekly 10/14 117-strike call, which appears to be seeing sell-to-open activity, indicating option writers expect MCD to stay below $117 in the near term.

From a broader sentiment perspective, McDonald's Corporation's (NYSE:MCD) 50-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) of 1.45 is just 2 percentage points from an annual peak, indicating a bigger-than-usual bullish appetite among option buyers. To reinforce this fact is MCD's Schaeffer's put/call open interest ratio (SOIR) of 0.94, which is in just the 36th percentile of its annual range, suggesting a stronger-than-usual call-skew among near-term traders.


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