McDonald's Corporation franchises and operates
McDonald's restaurants in the food service industry. These
restaurants serve a varied, limited, value-priced menu in
more than 100 countries globally.
The restaurants are
operated either by the Company or by franchisees, including
franchisees under franchise arrangements, and
foreign-affiliated markets and developmental licensees under
license agreements.
During the year ended December 31, 2007,
the Company sold its businesses in Brazil, Argentina,
Mexico, Puerto Rico, Venezuela and 13 other countries in
Latin America and the Caribbean, which totaled 1,571
restaurants, to a developmental licensee organization.
The
Company and its franchisees purchase food, packaging,
equipment and other goods from numerous independent
suppliers.
Terms
Of Use
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you agree to be bound by its terms of use.
The full terms of
use can be read here.
If you do not agree to the terms of use, do not access or use
this site.
Nothing presented is financial advice, trading advice or
recommendations. Everything presented is the author's ideas
only. The author accepts no liability for its use including
errors and omissions. You alone are solely responsible for your
own investing and trading. There are considerable risks involved
in implementing any investment strategies and losses can be
large. Trade at your own risk.
McDONALD'S
CORPORATION (MCD) - 2010
ONGOING EVALUATION
& TRADE
This is one of those stocks where stock
investor sites like fool.com praise it and tell everyone how
if they had only bought it 20 years ago they would be up
maybe 388%. Well if I had known 20 years ago that this stock
would give me a 388% return over 20 years I would have
bought it. What is the point of telling investors today that
this stock should have been bought 20 years ago? So instead
let's look at the stock today and decide what the goal
should be. My goal is to make an income from naked put
writing until I am assigned. Then I want to sell both calls
and puts. To begin let's look at the chart on this stock for
the past few months. The stock is trading roughly between
$55 and $60. When I look at the 10-20-30 moving averages,
the stock has a great trend, basically not really going
anywhere. This is great for naked puts and covered calls.
Starting By Selling Naked
Puts Until I am assigned or I can raise enough capital
to put myself into the stock in the mid 50's range.
Should I be unable to sell puts at the closest month
out, then I am willing to go further out in time.
However the main objective with the puts is to raise
enough capital to have my share valuation in the mid
50's.I am not interested in owning the stock long term.
I am interested in income from put and call writing.
Should the stock fall dramatically, I
will not be adverse to selling naked calls OTM.
If assigned I will sell Covered Calls until
exercised
If the stock should fall too low making
covered call selling impractical, I will add to my position to
lower my overall cost either through purchasing the stock or
selling additional naked puts or calls depending on the
circumstances.
UPDATE FOR JAN 2010. With
additional cash now available for selling puts in 2009 I
will become more aggressive.
UPDATE AUGUST 18 2010:
Read below my update as of August 18 2010
and see the
latest chart. New trend in the stock for selling
naked puts, has moved from the mid-50's range to the
mid-60's range. I will keep 4 naked puts in that range
and sell 5 near the top of the range around the $70
strike.
Should you find my strategy and ongoing evaluation of
this trade of value I hope you will consider a tip
for the time I spend detailing out this trade.
I have set up a Paypal account for those
who would like to donate. Thank you in advance. Remember, nothing on my site is financial advice.
They are just my ideas and opinions. Investing is risky and losses can be large. Trade
at your own risk.
Read the
terms of use
YEAR 1: 2009
Trade Commenced Jul 10 2009 Goal for 2010:
6% (6 months)
Strategy: Naked Puts until assigned stock
2009 - starting capital
22,000.00
2009 - ending capital
53,200.00
2009 - capital earned
4636.00
2009 - return on all trades
18.23%
YEAR 2: 2010 Goal for 2010: 12%
Strategy: Sell Naked Puts Until Assigned
2010 - starting capital
53,200.00
2010 - ending capital
43,500.00
2010 - capital earned
5461.00
2010 - return on all trades
12.55%
YEAR - 2: 2010
JAN 15 2010:
With the cash built from the last year's trading, I am now
ready to sell puts closer to the strike. You can see from
the chart above that MCD has had a great run. But resistance is presently
around $64.00 and support is around $61.00. If I am
put the shares at $60.00 I will be in this stock at
about 54.00. It is therefore time to be more
aggressive and sell closer to the ATM price.
Meanwhile I will continue to sell puts further out
in strike to augment the income and add some
protection in case of a pullback below $60.00. I
will reduce the number of contracts and the amount
in this stock by the time the March contracts expire
or I close them.
Jan 15 10
62.28
Expiry: 10 NPs Jan 60 Expired
Jan 15 10
62.28
STO 3 Naked Puts Feb 60 @ .65
1%
10.75
184.25
4783.50
Jan 21 10
63.31
BTC 3 NP Feb 60 @ .33
(0.5)
10.75
(109.75)
4673.75
Jan 21 10
63.31
STO 3 NP Mar 60 @ .78
1.3
10.75
223.25
4897.00
Mar 18 10
66.40
STO 5 NP Apr 67.50 @ 1.55
2.2
13.25
761.75
5658.75
Mar 19 10
66.53
Expiry 10 NP Mar 57.50 expired/ 3 NP
Mar 60 Expired
The stock has had a great move since Jan 15 2010, 7.6%. If I
go back and look at the 3 year chart at the top of the page
I can see that this stock was in a trading range between 50
and 60 dollars for some time. It has been a very strong
performer and with the recent dividend increase and
earnings, the stock is probably poised to trade perhaps
between 65 and 70. I will continue with a reverse naked put
strategy and sell the most recent month, at the money and
then split 6 contracts between two more strikes down,
further out in time. I do not intend to hold these positions
to expiry, only until the premiums decrease for a buy to
close. Then I will roll these puts out further and continue
the strategy unless fundamentals or technicals dictate that
a change in strategy is required. As well, once I have
earned enough income to purchase 100 shares I will sell
additional AT THE MONEY puts, which may increase my odds of
earning more income.
The stock is presently pushing
up against an overbought signal but overall I am not
concerned as I think on the low side it could fall
back to perhaps 62.50. Presently there appears to be
strong support at that level. The stock is up 17.5%
since August 2009 when I commenced my naked puts.
During that time period I have generated, 6147.00.
In order to have made this income through buying the
stock, I would have had to purchase approximately
600 shares at 56.45, tying up 33,870.00. In order to
generate the same income of $6147.00, while I did
not own any shares, I had to commit almost three
times that amount of capital to cash secured puts.
Again, this shows that in a rising market, buying at
the bottom, holding and then selling near the top
will almost always beat out selling covered calls
and naked puts. However while I did set aside over
100,000 to cover any possible assignment, I was
unconcerned as I was selling far enough out of the
money puts that the chance of assignment would have
required a severe downturn in the stock. Therefore I
used margin to cover these puts and continued to
invest my capital in other naked put positions which
generated additional income. Still though I was
unable to mimic the returns of the buy, hold and
sell approach for this stock through selling naked
puts. I will see how much better I do this year with
my change in strategy.
Mar 22 10
66.33
STO 3 NP May 65.00 @ 1.00
1.5
10.75
289.25
5948.00
Mar 22 10
66.33
STO 3 NP Jun 62.50 @ .90
1.4
10.75
259.25
6207.25
Apr 16 10
68.84
STO 5 NP May 67.50 @ .93
Comment: Reverse ladder is still in play. I am short naked
puts on the 65 and 67.50 strikes.
1.3
13.25
451.75
6659.00
Apr 16 10
69.03
Expiry: 5 NP Apr 67.50 expired
APR 23 2010:
Like so many stocks I am following, MCD has set a new 52 week
high. The stock remains in a strong uptrend and
recent earnings were very good. However as I am
selling naked puts, while the stock is up $14.57 or
over 14%, since I started in August 2009, my return
is around 10.6%. These are all signs that tell me
that the market is in a bull trend and no bear cycle
will appear for sometime yet. Two days ago more than
90 stocks set new 52 week highs, a sure sign of a
bull market. Should this stock pull back I will
continue to roll puts at the money. The reverse
naked put ladder is far more efficient bear cycles.
Covered calls cannot duplicate stocks that are in a
strong bull market. At the beginning of March the
stock was at 63.50 and we are up more than 10% since
then. My next move after May expirations, will be to
end the reverse put ladder and reduce the number of
contracts being sold as well as the amount of
capital being held for this position. I will then be
selling at the money puts until the stock pulls
back, which may still be sometime to come. By
reducing the capital and using it elsewhere, should
the market pullback I can take advantage of lower
prices and consider more puts or even stock
purchase. To this effect today I BTC a number of
positions and opened 3 NP for May 70 and 3 JUN 67.50
puts.
Apr 23 10
71.04
BTC 3 NP MAY 65 @ .09
(0.13)
10.75
(28.75)
6630.25
Apr 23 10
71.04
STO 3 NP MAY 70 @ .70
1
10.75
199.25
6829.50
Apr 23 10
71.04
BTC 3 NP JUN 62.50 @ .17
(0.27)
10.75
(61.75)
6767.75
Apr 23 10
71.04
STO 3 NP JUN 67.50 @ .70
See my comments for April 23, regarding the end of reverse
put ladder for the present time on this stock.
1.03
10.75
199.25
6967.00
May 11 10
70.58
BTC 5 NP MAY 67.50 @ .24
(0.36)
13.25
(133.25)
6833.75
May 21 10
67.86
Expiry: BTC 3 NP MAY 70 @ 2.15
Comments: This is a great company but looking at the premium
for Jun, there is no reason to accept assignment in May. I
believe it is better to capture more option premium and roll
to Jun at the same strike.
(3.0)
10.75
(655.75)
6178.00
May 21 10
67.86
STO 3 NP JUN 70 @ 3.51
5.0
10.75
1042.25
7220.25
Jun 1 10
66.28
STO 10 NP JUN 60 @ .21
0.35
19.50
190.50
7410.75
Jun 1 10
66.80
STO 5 NP SEP 60 @ 1.49
2.5
13.25
731.75
8142.50
JUNE 18 2010:
What a great recovery in MCD's
price. Now back at 70, my naked puts for Jun could
be closed for a .23 cents, locking in a large profit
from the May 21 sell of Jun 70 at 3.51. This also
allows me to commence selling naked puts back below
the current price and restart my naked put strategy.
Jun 18 10
69.88
Expiry: 3 NP JUN 67.50 expired / 10 NP
JUN 60 expired
Jun 18 10
69.88
Expiry: BTC 3 NP JUN 70 @ .23
10.75
(79.75)
8062.75
Jun 18 10
69.88
STO 4 Naked Puts JUL 67.50 @ .55
12.00
208.00
8270.75
JUNE 29 2010: Up and then down again. Well it
WAS a nice recovery and now MCD is moving down
again. This time there may be more selling as MCD
moves possibly lower. It can easily get down to 64
without concerning me. I did my usual strategy
today. I bought to close 4 JULY 67.50 puts and sold 2
JAN 65 puts for a nice net credit and that left
13000 of capital free for more puts so I sold the
August 60 puts for .65. This reduces my overall
capital exposed to MCD by 23000.00 and increases my
income by 337.00. While still holding above the 150
and 200 day, it shows the strength of this well run
company. If selling intensifies though, I believe it
will fall back to the low 60's. Anything below 60.00
is a good bargain on McDonalds and I look forward to
selling naked puts should it fall below 60.00.
Jun 29 10
66.55
BTC 4 Naked Puts Jul 67.50 @ 1.68
COMMENTS: SEE MY COMMENTS BELOW UNDER JUNE 29 2010
Another new 52 week high today. MCD has been setting new 52
week highs since the beginning of the month. I have closed
my Sept 60 puts and moved to Sept 70. I am thinking that
once the excitement of MCD's earnings dissipates, I could be
sitting close to or just about in the money. I would think
the stock would drift back into the 65 to 70 range. This
would allow me to sell puts at this range for sometime, and
reap higher premiums until the stock moves higher which
might not be until into the fall. Meanwhile I have rolled
two additional naked put to Dec 65 for 1.20. These are the
naked puts from August 60 which I expect will expire in two
more trading sessions when August puts expire this Friday.
This is a great success story. Imagine a stock holder who
bought shares back in August 2009 when I first started my
naked put strategy. They would have paid $56.45 and today
they would be up over $16.00 or 30% in one year, with the
dividends! This is why investors love to stay with strong
equities.
Aug 18 10
72.90
STO 2 NP DEC 65 @ 1.20
230.50
9076.75
Aug 20 10
73.08
2 Naked Puts Aug 60 expired
SEP 17 2010: McDonald's has set a lot of new
highs and you can tell from the chart that the
uptrend has been strong. However momentum is
decreasing and MACD is turning down BUT is above
0.00 indicating that the uptrend is still intact.
Once it falls below 0.00 it will mean the uptrend is
broken. McDonald's is a great company and the
previous low was 65 and the previous top was 70.00.
I will sell a couple of naked puts at 67.50 and then
see where trend takes the stock. If the trend
continues that will leave me with additional naked
puts I can write. I am holding puts already for
December and January. There is no premium worthwhile
for October so I will sell these 2 nakd puts for
March at 67.50
Sep 17 10
74.32
Expiry 5 Naked Puts Sep 70 expired
Sep 17 10
74.32
STO 2 Naked Puts Mar 67.50 @ 2.19
3.2
9.50
428.50
9505.25
NOV 5 2010: McDonald's continues to
climb. I am still sitting below $70.00 With my
earnings of over $9800.00, I am comfortable moving
higher. I have sold the Jan 75.00 naked put and I
will continue to keep rolling until I am eventually
assigned. The stock is in a major uptrend, but at
these levels, MCD is getting somewhat "lofty" in my
opinion and any stock pullback should be a great
opportunity to sell more naked puts at better
premiums.
Nov 5 10
79.04
BTC 2 Naked Puts Jan 65 @ .34
0.54
9.50
(77.50)
9427.75
Nov 5 10
79.04
STO 4 Naked Puts Jan 75.00 @ 1.15
1.5
12.00
460.00
9887.75
Nov 10 10
79.50
BTC 2 Naked Puts Dec 65 @ .13
0.20
9.50
(35.50)
9852.25
DEC 6 2010: McDonald's
has stayed in a short trading range since the beginning of
November. Today I closed the Jan 75 puts early and I wait a
few days as the stock is trading near the high end of its
range. I would prefer to sell the next set of naked puts
when the stock pulls back.
Dec 6 10
79.50
BTC 4 Naked Puts Jan 75 @ .22
12.00
(92.00)
9752.25
DEC 16 2010:
This is why I never buy when the stock hits a new 52 week
high. Looking at this trend each time the stock has made a
new 52 week high, it sells off and then the "dip buyers"
step in - those investors who buy stocks on the dip, and
they push it again and another new high is set. Then another
sell of. But this time the stock sold off and fell right to
the lower Bollinger but unlike the previous sell offs, this
time the stock has not recovered and the Lower Bollinger is
widening away which often indicates that the stock has more
room to fall. But today the put premiums are good and I have
made enough capital that I don't mind being assigned. I will
sell the Jan 75 again. This is double dipping as I make
another put sell in the same month - January.
