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

Oct 5, 2016 at 11:40 AM
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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.

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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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