MCD Analysis

McDonald’s Corp. (MCD)

Upate 2/24/2017:  MCD rose almost continually after earnings were published. I exited for a loss to avoid potential assignment on ex-dividend day.

Shares rose by 4.7% over 35 days, or a 49% annual rate. The options positon produced a 24.32% loss on debit for a =254% annual rate.


 

MCD publishes earnings on Monday before the opening bell

I shall use the MAR series of options, which trades for the last time 56 days hence, on March 17.

Implied volatility stands at 19%, which is 1.6 times the VIX, a measure of the volatility of the S&P 500 index.

MCD’s IV stands in the 33rd percentile of its annual range and the 69th percentile of its most recent broad movement.

The price used for analysis was $122.25.

Premium: $5.57 MAR iron fly
MCD   Odds Delta
Calls
Long 130.00 88.1% 13
Break-even 125.57
Short 120.00 42.5% 61
Puts
Short 120.00 57.0% 40
Break-even 114.43
Long 110.00 89.5% 9

The premium is 56% of the width of the position’s wings.

The risk/reward ratio is 0.8:1.

Decision for My Account

I have entered a position on MCD as described above. The stock at the time of entry was priced at $122.20.

By Tim Bovee, Portland, Oregon, Jan. 20, 2017

3 thoughts on “MCD Analysis

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