Near-Term Calls Popular amid McDonald's Stock Breakout

Call buying had been popular even before today

Jun 7, 2018 at 2:59 PM
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Options volume is accelerated on McDonald's Corporation (NYSE:MCD) today, after the Wall Street Journal obtained an internal memo detailing the company's plans to cut jobs -- or, as the company's USA President Chris Kempczinski put it in the memo: "... some employees will ultimately exit our system." As such, more than 41,000 calls have traded today, compared to a daily average of just 8,639, as traders speculate on more upside ahead for MCD stock.

Looking at the most popular options today, the June 170 call has seen the most action, but it's unclear how traders are positioning themselves here. Data is more clear in the weekly 6/8 series, which expires tomorrow. There, traders are opening new positions at the 165-, 167.50-, and 170-strike calls, and if buy-to-open activity is taking place, they're betting on the McDonald's rally continuing through tomorrow's close.

Call buying has been extremely popular on MCD, based on data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). The security's 10-day call/put volume ratio across these exchanges stands at 2.01, showing call buying more than doubling put buying in the past two weeks. The ratio also ranks in the 91st annual percentile, so such a focus on long calls is relatively unusual.

The blue chip is trading up 3.8% at $168.60, on pace for its best close since Feb. 2. MCD shares had been struggling to recover after a sharp sell-off following its late-January record high of $178.70, underperforming the S&P 500 Index (SPX) during the past two months. Still, the Dow component remains up 11.1% on a year-over-year basis.

Daily Chart of MCD Since June 2017

 

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