Behind the $5.5 million bet on McDonald’s

Options Action: Mac attack
Options Action: Mac attack   

This week's unusually bullish options activity on McDonald's continues, as one trader stakes $5.5 million in a massive bet on the fast food giant. It will make money only if McDonald's shares continues to rise through January.

It was Thursday's single biggest options trade on any stock in terms of the number of contracts traded. Specifically, the trader bought 38,786 January 95-strike calls on McDonald's for $1.41 per share. Since each call contract controls 100 shares of stock, this trade cost the buyer $5.47 million in options premium.

For the trade to make money, McDonald's needs to rise above the $95 strike price by more than the $1.41 being spent by January expiration—or above $96.41.

McDonald's shares were at about $92 when the trade was made, meaning the trader was looking for a 5 percent rise. However, the stock has powered higher since the trade, so only 3 percent gain from Friday's opening price is needed.

As the stock has cooperated, the value of those calls has risen substantially. Bought at $1.41, their value at Friday's open was $2. That means the trader has enjoyed a $2.3 million profit already.

Read More Rumor sends traders barreling into McDonald's

The Ronald McDonald balloon at a Macy's Thanksgiving Day Parade in New York.
Andrew Kelly | Reuters
The Ronald McDonald balloon at a Macy's Thanksgiving Day Parade in New York.

A recent surge in the stock has been driven by the rumor that activist investor Bill Ackman is initiating a new position in MCD. Ackman and his firm, Pershing Square Capital Management, have declined to comment. But some have gone so far as to speculate that Ackman was behind Thursday's call purchase.

On CNBC's "Fast Money," Mike Khouw said there was some logic behind such speculation.

"If you're acquiring the stock, the last thing you might to do is go out and buy some call options right before you make an announcement. That can be a way for you to level your bet without actually committing as much capital as purchasing the stock would require," he said. "And certainly, if he confirmed the rumors, you would probably see the stock go higher still."

So how does McDonald's feel about the notion that an activist may be getting involved?

In an earlier statement to CNBC, McDonald's spokeswoman Becca Hary wrote in part: "We welcome investment in our company."


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