Sell McDonald’s (NYSE: MCD) and Wendy’s (NYSE: WEN) Puts for Loss as Expiration Looms

By Linda McDonough • January 28, 2019

Sell to close the February 15, 2019 put on McDonalds (NYSE: MCD) with a strike price of $180 at $2.20 or higher. Symbol (MCD190215P180)

Sell to close the February 15, 2019 put on Wendy’s Company (NYSE: WEN) with a strike price of $16.00 at $.07 or higher. Symbol (WEN190215P16)

I hate booking a loss but these puts expire soon and will lose their value rapidly. Almost immediately after purchase, both stocks rose on good sales from competitor Restaurant Brands International (NYSE: QSR). The pre-announcement of sales by QSR was unexpected. The company chose to do this in conjunction with a significant executive departure.

I still believe that aggressive marketing by QSR owned chain, Burger King, will impair sales at Wendy’s and McDonald’s. However, the calls expire soon and the stocks are now well above the strike prices.

I had hoped the stocks would take a breather after their big run but they continue to run higher. I suggest collecting any capital you can from these trades and consider rolling into later expiration date puts.

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JoeJB

01/28/19 ‐ 10:14am ET January 28, 2019 at 10:14am ET

MCD STC @ $3.13 Not too bad really. Was debating if I should wait to see if market continues to slide, but thought this was close enough to break even to move.

Phil L.

01/28/19 ‐ 10:19am ET January 28, 2019 at 10:19am ET

MCD STC @3.10 Waiting on WEN value isn’t enough to harvest so I’ll take a dice roll.

Linda McDonough

01/28/19 ‐ 10:20am ET January 28, 2019 at 10:20am ET

Thanks, Joe. I do still believe their fundamentals are at risk so you might consider a further out put.

Jeff L.

01/28/19 ‐ 10:31am ET January 28, 2019 at 10:31am ET

wen is close to a full lose I will ride out the put

Dan

01/28/19 ‐ 12:34pm ET January 28, 2019 at 12:34pm ET

With MCD posting earnings on 1/30 (before market open this Wednesday), it seems like the dice roll of these puts hasn’t been cast yet. If MCD posts poor results, that is very likely to impact WEN just as QSR’s post pushed them both higher.
If your original thesis was correct, then MCD earnings should help us. Indeed, QSR posting strong results plays into your analysis that their marketing is working and eating into competitors. What’s good for QSR should be bad for MCD on Wednesday unless the total fast food market got bigger with QSR stealing from Chipotle and others up the food chain. Is there data on which of these two ideas is better?
I’m looking at it as I can withdraw from both positions at ~60% of original value or I can continue to hold for a win or full loss. A strong showing on Wed will likely kill both positions. However, I’m inclined to keep going on both.

Daniel Long

01/29/19 ‐ 10:55am ET January 29, 2019 at 10:55am ET

MCD STC Feb 15 P 180 for 2.50 credit.
Looks like WEN will be total loss – no interest in sale at 0.05.
Thanks, Linda.
DL

01/30/19 ‐ 1:30pm ET January 30, 2019 at 1:30pm ET

Well, today’s MCD earnings beat was not what I was looking for. Should have listened and sold as advised.
Interesting side question, why does the portfolio page show a WEN call? It has the same dates and pricing as the 1/15 WEN put trade but it’s still listed there as a call.

01/30/19 ‐ 3:16pm ET January 30, 2019 at 3:16pm ET

I agree on the earnings front. The MCD number was good but I don’t think worthy of the stock move. Thanks for the heads up on the incorrect listing on the WEN puts, I’ve corrected that on the back end.
Best,
Linda

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