McDonald’s Corporation (MCD) operates and franchises restaurants in 119 countries around the world with nearly 35,000 locations worldwide. The company’s stock is currently trading around $95.00 in a 52 week range of $83.31-$103.70. MCD has performed well this year, but has lagged the broader market, rallying 7.56% year to date. MCD is set to report their most recent quarterly earnings on Monday morning before the bell. The stock has been weak on earnings day having sold off 3 of the past 4 quarters. Over the past 8 quarters the stock has sold off 5 times with an average move of 2.4%. MCD is looking relatively weak on a chart. Shares are trading below the Ichimoku Cloud and the futures cloud is indicating there could be more downside in store for MCD. The options market is currently implying a move of $1.90 (1.99%) higher or lower by next Friday’s expiration. With historically weak performance in MCD and the bearish chart set up we believe that MCD is a good candidate for a short into earnings. Using the implied move we can calculate a downside target of $93.60 and set up a trade at that target.
Trade: Buying the MCD 94-93 Put Spread for $0.25
Risk: $25 per 1 lot
Reward: $75 per 1 lot
Breakeven: $93.75
