2nd Trade Update May 21st, 2012: With MCD bouncing off of $90 today, a fairly important support level and the stock down about 4% in a straight line since legging into this trade. With the stock at 90.58 I just sold the June 92.50/90 Put Spread that I legged into for now Premium at 1.50. At this point I don’t love the risk/reward anymore, I am risking 1.50 of gains to make another 1.00 btwn now and June expiration.
ACTION: SOLD to CLOSE June 92.50 / 90 Put Spread at 1.50
Trade Update May 9th, 2012: With MCD down 2.5% since buying the June 92.5 puts yesterday morning for 1.60 I am now going to leg into the June 92.50/90 put spread by selling the same amount of the June 90 Puts that I own of the June 92.5 puts. Now I can’t lose a penny on the trade and have the 2.5 wide put spread on for free.
So now the trade looks like this:
Long MCD June 92.50 / 90 Put Spread for Even money.
May 8th bought June 92.5 put for 1.60
May 9th sold the June 90 Put at 1.60
Break-Even on June Expiration:
Max profit of 2.50 if stock is 90 or below, up to 2.50 btwn 90 and 92.50, no profit above 92.50
Original Post May 8th, 2012: McDonalds (MCD): I’m Shortin’ It
Couple quick bullets that support near term bearish thesis:
- Company missed same store sales estimates this morning, despite Europe beating, the US was weak (go figure?).
- Technically the stock broke it’s 200 day moving average for the second time since 2009
- Realized volatility in the name is near 5 year lows, with Implied volatility of 16 only 2 points above the 60 day realized vol
- Given global uncertainty from US to Europe to Asia, pressing the short through the use of options makes sense in a name like this with defined risk.
Implied vol has ticked up recently and is now slightly higher than the average for the past year. It is a couple of points higher than the recent actual volatility in the stock. Like most stocks, the vol levels reached much higher heights during last summer’s European mess. The current levels in implied vol are approaching levels the options have seen going into the last few earnings reports:
Here’s the trade: