Shares rose by 4.1% over 10 days, or a +149% annual rate. The options produced a 100% yield on debit, for a +24,674% annual rate.
The fast-food chain McDonald's Corp. (MCD), headquartered in Oak Brook, Illinois, publishes earnings on Thursday before the opening bell.
[MCD in Wikipedia]
Click on chart to enlarge.
|MCD at 11:30 a.m. New York time, 30 days hourly bars|
|Week||SD1 68.2%||SD2 95%||Chart||Earns|
I shall use the JUL5 monthly series of options, which trades for the last time nine days hence, on July 31.
short the $94 puts and long the $92 puts,
sold for a credit and expiring Aug. 1.
Probability of expiring out-of-the-money
The risk/reward ratio is 2.4:1.
The zone of profit in the proposed trade covers a $3.50 move either way. The biggest immediate move after each of the past four earnings announcements was $2.97, and the average was $1.54.
Decision for My Account
I've opened a position in MCD as described above.
-- Tim Bovee, Portland, Oregon, July 22, 2015
My volatility trading rules can be read here.
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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.
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