McDonalds (MCD) 11/3/09 PriceWatch Alert Up To 2.23% Downside Protection

Posted: Tuesday, November 03, 2009 8:23 AM EDT
By: Market Intelligence Center Staff

McDonalds (NYSE: MCD) closed yesterday at $59.16. 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 58.16 and resistance in the 60.04 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 Mar '10 62.50 covered call (MCD CZ) for a net debit in the $57.84 area. That is also the break even stock price for this trade. This covered call has a 137 day duration, provides 2.23% downside protection and an 8.06% assigned return rate for a 21.46% 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 50 Call (VMD AJ) and selling the Mar '10 62.50 call (MCD CZ) for a $9.03 debit. The trade has a 137 day life and would provide 0.22% downside protection and a 38.43% assigned return rate for a 102.00% annualized return rate (for comparison purposes only). McDonalds has a current annual dividend yield of 3.38%. [ATU-Seven Summits Research]