One of the most interesting “smart money” trades we came across yesterday was with McDonald’s Corp (NYSE: MCD).
If you’re new here, a “smart money” trade is a relatively large volume option trade most likely made by a pro trader. The idea is to analyze unusual options activity, identify an interesting “smart money” trade, and then make our best guess as to:
- Which direction the trader thinks the stock is headed
- How much they think it will rise (or fall), and
- In what time frame this will all happen.
If we like what we see after putting all these pieces together, we can mimic the “smart money” trade (on a smaller scale), and potentially ride alongside our pro trader to profits. With all this in mind…
A Pro Trader Just Bet $1,227,000 that MCD Will Continue to Climb in the Next 7 Weeks
On Monday, November 29, 2021, a pro trader seems to have bought 300 of the January 21, 2022, $210 call options on MCD for $40.90 per contract. Her outlay was $1,227,000.
Interestingly, there seem to be multiple option trades done for MCD yesterday, for the same strike price and expiration date, with the total amount translating to multi-million dollars.
MCD – Option Trades
The trade’s breakeven point is at $250.90, meaning that MCD needs to rise to $250.90 for the call option trade to break even. This is near the stock’s previous close of $250.30. And then for every $1 the stock rises above $250.90, our “smart money” trader will make $30,000!
On analyzing the daily chart of MCD, the stock seems to have broken out of a consolidation area (marked as a pink color rectangle). This breakout level would now act as a strong support area. The stock is also trading within an upward sloping trend channel, which is marked as blue color lines. All this makes it likely that our pro trader is bullish on MCD.
MCD – Daily Chart
This lends credence to our conclusion that the pro bought these call options, as opposed to selling them.
If you agree and would like to mimic this trade, here’s how:
Buy to open the January 21, 2022, $210 call options on MCD for $40.90 or better.
As always, depending on your risk appetite, do remember to set a stop-loss for the options trade to avoid significant losses.
Happy Trading!
— Trades of The Day Research Team
Legendary Stockpicker: "Buy this A.I. stock NOW" [sponsor]His award-winning system pinpointed NVDA and META before both stocks doubled. Now it's flashing "BUY" on this under-the-radar A.I. stock. MORE HERE...