MCD Analysis

McDonald’s  Corp. (MCD)

Update 7/28/2017: MCD rose by $7 after earnings wee published and then zig-zagged its way downward over three days, losing about half of its gains. I exited at 21% of maximum potential profit, below my 25% profit.

Shares showed a net rise of 1.8% over four days, or a +163% annual rate. The options position produced a +27.0% yield on debit for a +2,462% annual rate.

MCD publishes earnings on Tuesday before the opening bell.

I shall use options that trade for the last time 11 days later, on Aug. 4.

Implied volatility stands at 20%, which is double the VIX, a measure of the volatility of the S&P 500 index.

MCD’s IV stands in the 0th percentile of its annual range and the 98th percentile of its most recent broad movement.

The price used for analysis was $152.67.

Premium: $4.66 Expire OTM  
MCD-iron fly Strike Odds Delta
Long 162.50 93.6% 7
Break-even 315.00
Short 152.50 49.9% 52
Short 152.50 49.8% 48
Break-even 147.66
Long 143.00 89.4% 10

The premium is 48% of the width of the position’s wings.

The risk/reward ratio is 1.1:1.

Decision for My Account

I have entered an order on MCD as described above. The stock at the time of entry was priced at $152.74.

By Tim Bovee, Fukuoka, Japan, July 24, 2017


Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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