Butterfly Option Strategy for MCD
Just added a new option trade in my personal portfolio today.
It’s a classic butterfly spread on MCD – McDonald’s.
The trade was Buy 2 April 70 puts, Sell 4 April 75 Puts, Buy 2 April 80 Puts for a debit of 3.11 per spread or a total cost of $622.
It’s a cheap trade that will make money if MCD stays between 73.12 and 76.92.
Here’s the graph:
The option trade has a 48% probaility of profit at expiration. But I don’t want to stay until expiration. I want to make 10-20% and get out within 2 weeks. This will happen if MCD stays where it is, or if the volatility in MCD options goes down.
With the end of the quarter coming up next week I am expecting the markets to go strong and higher into April. That will result in a drop in volatility and hopefully a quick profit.
If this option trades needs an adjustment, I will add a second butterfly of the same size at either 70 or 80 when it hits the breakeven point on either side.
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