Options Trading News

December 28, 2012  Fri 3:47 AM CT

McDonald's has turned lower in recent days, but one trader apparently remains bullish on the fast-food giant.

optionMONSTER's Heat Seeker system shows that more than 6,500 January 90 calls were sold mostly for $0.50 yesterday while more than 7,500 March 92.50 calls were bought for an average of $0.83. Volume was below open interest in the January options but above it in the March contracts, suggesting that a position was being rolled forward.

This suggests that an investor is closing the earlier-dated calls, which expire in three weeks, and is buying contracts at the later expiration to get more time for the strategy to work. The trader is also moving the calls to a higher strike price, indicating he or she is even more bullish on the stock.

MCD was down fractionally to $87.72 yesterday, continuing to pull back since hitting resistance near $90 last week. Shares gapped down to that $90 level from about $93 on Oct. 19 after the company missed earnings expectations, and the stock hit a 52-week low of $83.31 a month later.

The new long calls are now looking for MCD to return to levels where it traded before the October plunge. But if the stock is below the $92.50 strike price by mid-March, those contracts will expire worthless. (See our Education section)

Overall option volume in the name was nearly triple its daily average for the last month. Calls outpaced puts by more than 3 to 1.
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I have written a few things on the Covered Call Strategy over the last two weeks. Please understand that those two previous articles plus this one do not constitute a proper, fully in-depth lesson on the Covered Call Strategy like we have in our classes at Option Monster Education. I have picked out a few topics that I believe were worth noting and today I am going to add the final one.

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