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McDONALD'S
CORP
 
About The Company

Market Capitalization $78.5B
Revenue (FYR) $24.1B
EPS $4.58
P/E Ratio 16.4x
Shares Outstanding 1.0B
Dividend $2.44

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
 
By using this site, 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.

 
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  McDONALD'S CORPORATION  (MCD) - 2011
ONGOING EVALUATION & TRADE
Now into the third year, this trade has been working well. To date I have $43500 of capital tied to McDonalds and I have generated $10,000 in income in 17 months. Starting this year I will increase the number of puts sold from 6 to 7 contracts. This is a great company with enormous earnings and excellent trading ranges making my job of selling naked puts a lot easier. Basically when the upper bollinger is being challenged I hold off selling my puts. When the lower bollinger is being tested, I sell my puts. Selling naked puts on McDonald's is relatively easy as by now I have earned a quarter of the capital I want and I can be a little more aggressive. Nonetheless, I am still planning on keeping 2 of my naked puts further out in time and at a lower strike. This means if I am assigned at the higher strike I have two puts at a lower level which if assigned on the lower puts, basically means I am overall averaging in lower on the stock.
McDONALD'S TRADES BY YEARS
VIEW McDonald's-2011 TRADES
VIEW McDonald's-2010 TRADES
VIEW McDonald's-2009 TRADES


McDONALD'S REVIEW - Year 3
I suggest reading the prior years to fully understand the trade. Overall the strategy is to eventually own shares in McDonald's but with as little of my own capital as possible. To quickly review:

  • 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. See my comments on the ongoing strategy, below or by clicking here.

  • UPDATE MARCH 2010. Read below my update as of March 22 2010.

  • UPDATE AUGUST 18 2010: Read below my update as of August 18 2010 and see the following 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.
    UPDATE JAN 2011: I plan to increase the number of put contracts from 6 to 7. This is primarily to use some of the capital I have earned to date. I also will continue to sell 2 naked puts further out in time and at lower strikes. This is to assist should the stock fall and I get assigned at the higher strike and lower strike, I will have averaged myself into the stock, at a lower valuation.

  • In November 2010 the stock set another new 52 week high, but McDonald's needs much better earnings to move much higher. I believe the stock will be in a trading range somewhere between 72.50 to 77.00 for much of the year. I will sell my puts against the lower Bollinger Band.

 

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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 August 2009
Goal for 2010: 5% (5 months)
Strategy: Naked Puts until assigned stock
 
Capital In Use At End Of 2010 60,000
Income Earned in 2010 (10 months) 4599.25
Return On Capital in 2010 (10 months) 7.6%
   
YEAR 2: 2010
Goal for 2010: 12%
Strategy: Sell Naked Puts Until Assigned
 
Capital Currently In Use 43,500.00
Income Earned in 2010 5461.00
Return On Capital in 2010 12.55%
   
YEAR 3: 2011
Goal for 2010: 12%
Strategy: Sell Naked Puts Until Assigned
Keep 2 contracts at lower strikes
 
Capital Currently In Use 54021.50
Income Earned in 2011   3892.75
TOTAL INCOME EARNED TO DATE 13953.00
Total Of My Own Capital Required 40,068.50
Number Of Shares if assigned 600
Share Price Valuation
(Total Capital Required/Number of shares)
66.78
YEAR - 3:  2011
TRADE COMMENCED March 5 2010
GOAL FOR 2011: 12%

ONGOING STRATEGY - SELLING NAKED PUTS UNTIL ASSIGNED
* ACTIVE TRADES ARE HIGHLIGHTED IN YELLOW

 

JAN 12 2011: The stock is under pressure. Earnings were good but not as great as many had wanted. The more important aspect was that the earnings revealed an increase in the cost of doing business which could impact McDonald's earnings for 2011. I believe the stock will stay stuck in a trading range. Right now the trend is lower, but as per my notes above under the section of review, I feel the lower range could be $72.50. Everything points to the stock moving lower except the oversold condition on the stock. Therefore I am buying to close my March 67.50 puts but I will wait for this move to bottom and then buy and close my Jan 75 naked puts and roll them into March, as I believe the stock will recover by then and I can capture all of the premium all the way up.

Jan 12 11 74.00 BTC 2 Naked Puts March 67.50 @ .55 0.80     9.50     (119.50) 9940.75
JAN 13 2011: Just a day later and the stock hits my low range of $72.50. I have put in place my strategy. I just waited for the stock to hit $72.50 and then did my trades. I had established the trading range I expected and I have watched my technicals. If I am wrong and the stock sells off further, I am well positioned to weather the downturn. I am sure the stock will recover to $75.00.

On the sell side I have increased my put contracts from 4 to 5 which brings the overall naked puts being sold to 7 contracts.

Jan 13 11 72.55 BTC 4 Naked Puts Jan 75 @ 2.70 3.6%     12.00     (1092.00) 8848.75
Jan 13 11 72.55 STO 5 Naked Puts Feb 75 @ 3.60 4.9%     13.25     1786.75 10635.50
Jan 13 11 72.55 STO 2 Naked Puts Mar 67.50 @ 1.00 1.4%     9.50     190.50 10826.00
Feb 18 11 76.13 Expiry 5 Naked Puts Jan 75 expired                
Feb 18 11 76.13 BTC 2 Naked Puts March $67.50 @ .35 0.5%     9.50     79.50 10746.50
Feb 18 2011: The stock has recovered and my puts expired. It was a nice trade. However the stock is weaker at this level and I believe it will pull back. I closed the March 67.50 puts today and I will place all my naked puts back into focus in a few days.


 

Feb 25 2011: The stock has pulled back. I have placed my 5 naked put trades but I am holding off on the 2 lower naked puts as I believe the stock could be heading lower. Below my charts show my outlook for the stock. I am selling the $75.00 as I believe if the stock falls it will recover back to the $75.00 range.


 

Feb 25 11 74.65 STO 5 Naked Puts Mar $75.00 @ 1.35 1.8     13.25     661.75 11408.25
Mar 2 2011: The stock took a tumble today and I sold my 2 additional puts.


 

Mar 2 11 $73.75 STO 2 Naked Puts JUN $67.50 @ .88 1.3%     9.50   13,509.50 166.50 11574.75
Mar 18 2011: With expiry today the stock closed at $72.99. I closed my Mar 75 puts and rolled into April. Looking a the chart I should have bought to close my naked puts last week or at least on Monday, but with the news from Japan, MCD has fallen. I believe it will recover again once the news from Japan calms down and the stock will turn. Note how today the stock is once again near the lower end of what I feel is the trading range - namely near $72.50.


 

Mar 18 11 73.25 BTC 5 Naked Puts Mar 75 @ 2.00 (2.6%)     13.25     (1013.25) 10561.50
Mar 18 11 73.20 STO 5 Naked Puts Apr 75 @ 2.80 3.7     13.25     1386.75 11948.25
Apr 15 2011: Looking at McDonald's the stock is back in an uptrend. When I look at the low points of the stock since January it is still making new higher lows. While it has not recovered to above 80 as it was in December, the stock is slowly grinding higher. I see no problem selling the 75 strike again. It may end up in the money next month but I am fairly confident it will end up out of the money in subsequent months.

Apr 15 11 76.80 STO 5 Naked Puts May 75 @ .82 1.05     13.25   37,513.25 396.75 12345.00
Apr 15 11 77.38 Expiry: 5 Naked Puts April 75 expired                
May 20 11 82.33 May Options Expiry: 5 Naked Puts May 75 expired                
May 20 11 82.33 BTC 2 Naked Puts JUN $67.50 @ .04 (0.13)     9.50     (17.50) 12,327.50
MAY 23 2011 McDonalds Stock continues to climb. I cannot sell naked puts at this level as I believe it is over valued. The Ultimate Oscillator has been oversold for a few sessions. There is never any guarantee of a pullback, but I would think one has to come soon for McDonalds. Until then, this trade is on hold.


 

Sep 23 11 86.25 Sold 6 Out Of The Money Puts NOV 82.50 @ 1.67
COMMENTS: Select this MCD STOCK link to read the reasons for re-entering MCD Stock put trades on Sept 23 2011.
1.3%     14.50   49514.50 987.50 13315.00
Nov 21 11 92.28 Sold 3 Out Of The Money Puts 21JAN12 $82.50 @ 1.00 1.2%     10.75   24760.75 289.25 13604.25
Dec 5 11 95.28 Sold 3 Out of The Money Puts 21JAN12 $90 @ .43 0.4%     10.75   27010.75 118.25 13722.50
Dec 19 11 97.00 Sold 3 Out of The Money Puts 18FEB12 $90 @ .88 0.9%     10.75   27010.75 253.25 13975.75
Dec 29 11 100.55 Bought To Close 3 21JAN12 $82.50 puts @ .04       10.75     (22.75) 13953.00
McDONALD'S TRADES BY YEARS
VIEW McDonald's-2011 TRADES
VIEW McDonald's-2010 TRADES
VIEW McDonald's-2009 TRADES

 

 

Disclaimer: There are considerable risks involved in all investment strategies. Trade at your own risk.
Stocks, options and investing are risky and can result in considerable losses. None of the strategies, stocks or information discussed or presented are financial advice, trading advice or recommendations. Fullyinformed.com is a private website. Everything presented and discussed are the author's ideas and opinions only.
By using this site, 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 use this site. The author of fullyinformed.com assumes no liability for topics and ideas discussed, errors and omissions, ads and their content and external links. Any corporate insignia used are registered trademarks of their respective company or corporation and are being used for identification purposes only. All material copyrighted by FullyInformed.com. Reproduction in whole or in part prohibited. Copyright 2008

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