In case you were wondering (which I’m sure you weren’t), I do not eat fast food often. When I do, it’s usually Moe’s, Chick-fil-A, a Wendy’s salad, or something from Arby’s (who really has stepped up their game recently). I do not eat at McDonald’s. No specific reason that I am aware of other than, when I was a young boy of about six, I decided to choose between either McDonald’s or Burger King for life and there was no turning back. 21 years later, I eat much less Burger King and still zero McDonald’s.
However, to show real sportsmanship I can trade MCD. Over the last three to four years, MCD has been in a giant distribution phase, meaning, it’s been trading sideways. Then, on 10/22/15, MCD had a beautiful earnings report and an incredibly bullish gap. Some call this a breakaway gap, I call it a gap and go, the name doesn’t matter. What’s important is the sentiment and from here I think MCD is about to go burgers.
How can we trade it? Well, I think investors have a few choices at this point:
A) Simply buy it now
B) Wait for a pull back to buy (around $110 or lower)
C) Sell a put and get paid to buy the shares you already want to own
I am going with C. My plan is to sell to open a $108 put, which expires in November. If MCD closes below $108.00 on the 19th of November I will likely be put shares of MCD stock. If MCD simply closes above $108 I will bring in approximately $0.74 per contract. Not tons of premium, but it lowers my dollar cost average from $108 to $107.26 and that’s exciting.
My future projections for MCD are in the $140 range 12 months or so from now. Let’s see what happens. The best we can do is to create a trading plan and follow it!
