McDonald's Corporation (NYSE:MCD) is the top Dow gainer this morning, with the stock tapping a record high of $174, after the company announced it's again revamping its menu by introducing a list of items costing $1, $2, or $3. The new Dollar Menu will debut nationwide in January. Jefferies responded by upgrading the stock to "buy" from "hold" and boosting its price target to $200 from $150. Up 42.6% year-to-date, including 1.5% today, 20 of 27 covering analysts already recommend buying MCD stock.
Interestingly, McDonald's has a Schaeffer's put/call open interest ratio (SOIR) of 2.84, showing put open interest among options expiring within three months nearly triples call open interest. This also marks a 52-week high for the indicator, so such a heavy put-skew hasn't been seen in the past year.
There'salready heavy put action early today, with more than 3,000 of the contracts crossing so far. Data gives the impression of buy-to-open activity at the weekly 12/8 172.50-strike puts, as some speculate the stock will fall back below the strike by Friday's close, when the contracts expire.
While surely some options traders are betting on a pullback, longer-term put players are probably using options to hedge their long positions in McDonald's stock. For example, the out-of-the-money January 2018 110-strike put is home to peak open interest for the security, with more than 19,000 contracts here.
Signs suggest it's become more expensive to bet on the shares' short-term moves, too. Specifically, MCD's Schaeffer's Volatility Index (SVI) of 17% ranks in the high 71st annual percentile, hinting at unusually high volatility expectations at the moment.