McDonalds (MCD) PriceWatch Alert Up To 2.57% Downside Protection

Posted on Monday, September 08, 2008 8:07 AM

McDonalds (NYSE: MCD) ended the last trading session at $60.30. So far the stock has hit a 52-week low of $49.00 and 52-week high of $67.00. McDonalds stock has been showing support around 59.20 and resistance in the 61.02 range. Technical indicators for the stock are Bearish and S&P gives MCD a neutral 3 STAR (out of 5) hold rating. MCD appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Dec '08 65 covered call (MCD LM) for a net debit in the $58.75 area. That is also the break even stock price for this trade. This covered call has a 103 day duration, provides 2.57% downside protection and a 10.64% assigned return rate for a 37.70% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the MCD Jan '10 45 Call (WMN AI) and selling the Dec '08 65 call (MCD LM) for a $15.85 debit. The trade has a 103 day life and would provide no downside protection and a 26.18% assigned return rate for a 93.00% annualized return rate (for comparison purposes only). McDonalds has a current annual dividend yield of 2.38%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]