Wednesday, July 22, 2015

MCD Analysis

Update 8/1/2015: The MCD calls and puts expiried without value.

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
Implied volatility stands at 2.1%, which is 1.7 times the VIX, a measure of volatility of the S&P 500 index. MCD’s volatility stands at the peak of its most recent rise.

Ranges implied by options and the chart
WeekSD1 68.2%SD2 95%ChartEarns
Implied volatility 1 and 2 standard deviations; chart support and resistance, maximum earns move

The Trade

I shall use the JUL5 monthly series of options, which trades for the last time nine days hence, on July 31.
Iron condor, short the $101 calls and long the $103 calls,
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 premium is $0.58, which is a bit less than a third of the width of the position’s wings.The stock at the time of purchase was priced at $97.64.

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.
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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