Earnings came out today. Back on April 25th I talked about two days of selling pressure on McDonald's. That was "pre-earning release gitters". If the economy slows down people will start spending less money there. People owning the stock were cashing out. So today their quarterly earnings came out and as no suprise their earnings were a tad on the light side. Here is the entire summarized story. It's an easy read.
Do I like playing options on McDonalds? It's a difficult stock to go against. When they lost all their franchises in Russia a few years ago I was expecting the stock to crash. It didn't. What I also know is that whenever a new subdivion opens up in any city in North America there room is for yet another new outlet. So investors buying Puts yesterday on the close didn't do all that well. Last week's players did.
Now the new question. With the stock off over $5.00 twenty minutes into the trading session is it to late to come to the party to buy McDonald Puts? We now have to look at the Puts one week out. Tomorrows Puts that expire are to tricky to play at this time of the day. But wait. Read yesterdays blog about First Solar. Call option traders were offered a gift after the stock crashed on the opening. Why not just wait for an easier battle? Who would have the guts to be buying Puts on a stock already down over five dollars on the day? Their earnings were not that bad. Here now is where one series of next weeks Puts are trading at. They expire May 9th.
Now here is a thirty day look at it's chart.
Now it's 90 day chart.
So yes, the stock could sell off another five dollars in the next week. But wait. Yet knowing that two better Put opportunities have just happened with McDonalds takes the fun out of watching this action. Option traders must learn to be ahead of the curve. It's easier said that done. Part two. Changing conditions as of 11:30:a.m. The game changes. Look at this, the McDonald Put options that expire tomorrow. The stock has rebounded back up a bit from when we first looked at it. If a down day happens tomorrow or sells off more once again this afternoon then the reality of declining profits and a recession on the horizon might start to kick in. Might these two series of Puts now be something to consider? McDonalds did sell off last Thursday afternoon and last Friday.
Remember the 312.50 Puts for next week we were looking at which were trading for $3.54 on a volume of only 54 contracts. Here is what they are now trading at.
The volume is now up to 169 contracts. Now this. The 317.50 Puts have gone up in price from $1.94 to $3.50 and the 315 Puts have gone up in price from $1.00 to $1.80! That happened in about a fifty minute time period. You can see that move on the chart below.
You had to be quick as it was a 12:00p.m. to 12:30p.m. event.
Here is how McDonalds closed the day.
This is strange. Both series of Puts we are watching actually dropped in price even though the stock was down over $6.00 on the day! Interday traders were the only ones that made money. All the Call holders lost money. It might take some time to let this reality sink in. It's all part of the trickery of Thursday options with one day of life left in them.
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Now what? A Friday 1:19 p.m. update. The DJIA is up over 500 points and the stock is off.
Here are the 312.50 Puts for next week that we have being watching at 1:30 p.m. When we looked at them early yesterday morning they were trading a $3.54.
The release of quarterly profit reparts is so important to short term option players.
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