Markets

Big doubters in McDonald's

McDonald's has been crumbling, and traders think the stock will remain weak into the fourth quarter.

optionMONSTER's tracking programs detected the sale of 5,500 October 95 calls for $1.25 and the purchase of an equal number of September 97.50 calls for $0.35. Volume was below open interest at the higher strike, which suggests that an existing short position was rolled down in price and out in time.

Writing calls obligates the investor to deliver shares at the strike price in return for cash now. Rolling the position lower let him or her collect an additional $0.90 of premium while keeping them short an additional month. See the discussion of covered calls in our Education section for more.

MCD rose 0.26 percent to $93.55 on Friday, but is down 7 percent in the last month. The shares fell sharply following a weak earnings report on July 22 and continued lower amid bearishness toward Europe and as monthly sales data missed estimates.

The drop was especially noteworthy because it came after the hamburger giant stalled below $104 --exactly the same area where it peaked in 2013. Some chart watchers may consider the pattern a double-top, potentially signaling the end of an 11-year bull run.

Total option volume was twice the daily average in the session.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

MCD

Other Topics

Options

Latest Markets Videos