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McDonald's (MCD - option chain) stock is trading lower today after the company said its net sales rose 0.7 percent in November. However, US same-store sales fell 0.6 percent during the month, the second straight monthly decline and only the fourth in the past 6 and a half years. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on MCD.This morning, MCD opened at $60.45. So far today the stock has hit a high of $60.91 and a low of $60.04. As of 12:10, MCD is trading at $60.73, down $1.20 (-1.9%). The chart for MCD looks bullish and S&P gives MCD a positive 4 STARS (out of 5) buy ranking.
For a bearish hedged play on this stock, I would consider a January bear-call credit spread above the $65 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 4.8% return in seven weeks as long as MCD is below $65 at January expiration. MCD would have to rise by more than 7% before we would start to lose money. Learn more about this type of trade here.
MCD hasn't been above $65 at all since in the past year and has shown resistance around $64.75 recently.
Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent controls bullish hedged positions in MCD. Both these and the trade above can be profitable at the same time.
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