McDonalds (MCD) 10/26/09 PriceWatch Alert Targets 19.35% Return

Posted: Monday, October 26, 2009 8:11 AM EDT
By: Market Intelligence Center Staff

McDonalds (NYSE: MCD) ended the last trading session at $59.43. So far the stock has hit a 52-week low of $50.44 and 52-week high of $64.46. McDonalds stock has been showing support around 58.76 and resistance in the 59.94 range. Technical indicators for the stock are Bullish and S&P gives MCD a very positive 5 STAR (out of 5) strong buy rating. MCD appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Dec '09 60 covered call (MCD LL) for a net debit in the $58.33 area. That is also the break even stock price for this trade. This covered call has a 54 day duration, provides 1.85% downside protection and a 2.86% assigned return rate for a 19.35% 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 '11 40 Call (VMD AH) and selling the Dec '09 60 call (MCD LL) for an $18.60 debit. The trade has a 54 day life and would provide 1.40% downside protection and a 7.53% assigned return rate for a 51.00% annualized return rate (for comparison purposes only). McDonalds has a current annual dividend yield of 3.43%. [ABR-Seven Summits Research]