15d • General discussion
Collecting Premium on a World-Class Franchise Sitting Below Every Moving Average
There's a pattern I keep coming back to: great businesses occasionally fall below key moving averages, and not because something is broken at the core. Because the tape gets ugly, sentiment drifts, and everyone sells. Then the business keeps compounding and the chart eventually reverses.
Today that name is McDonald's.
MCD is pressing against its 52-week low, trading near $271. It's down roughly 20% from the $342 high earlier this year. The 50-day moving average is in the $279-289 range. The 200-day is at $303-306. The stock is below all of them, death cross confirmed, MACD below signal.
This is a business with roughly 40,000 locations worldwide generating approximately $7 billion in free cash flow annually. A dividend that has grown for decades. The kind of franchise model that collects royalties through every recession, rate cycle, and consumer panic on record.
The chart says sell. In my view, the business says this is temporary.
Distortion 1: The options market isn't pricing crash
30-day implied volatility is running around 16.5%. 10-day realized volatility is near 21%. There's a modest volatility risk premium in the front of the curve, but it's not extreme. Short-dated options are pricing 2-4 week moves of roughly 3-4%.
Puts priced slightly above calls on a relative basis, but not at panic levels. In the very front of the curve, call IV has actually been running above put IV, which tells you the dominant flow is overwriters and credit call strategies, not one-sided put buyers bracing for a structural breakdown.
The market thinks MCD grinds from here, and that ambivalence is where premium sellers find their entry.
Distortion 2: The crowd is leaning the wrong way
Options volume has been running 70% above normal in MCD recently, and almost all of that flow is credit call strategies: traders selling call spreads betting the stock won't reclaim resistance anytime soon. That's a directional positioning bet that MCD stays down.
Meanwhile, dealer gamma sits near flat just above $280. If MCD pushes back toward $287-290, hedging flows flip from dampening to amplifying. The crowded short-call overhang becomes forced-covering fuel, and any bounce into that area turns reflexive fast.
The pain trade is up, the crowd is leaning the other way. In my personal experience, this is one of the better environments to be collecting premium on the put side. You're not fighting the crowd; you're selling to them.
Distortion 3: Macro is providing the pressure, not the damage
CPI came in at 4.2% YoY in May, energy costs are squeezing lower-income consumers, the Fed is holding at 3.50-3.75%. These are real near-term headwinds for QSR traffic.
But McDonald's gains market share in downturns. When budgets get tight, consumers trade down, and MCD tends to benefit from exactly the kind of stress the current macro is creating. The same environment weighing on the stock chart is also funnelling customers through the doors.
In my view, it's a quality franchise caught in a macro cross-current, sitting on meaningful support.
My trade
With MCD near $271 and pressing against long-term support, I'm putting on a put ratio spread to the August 21st expiry (60 DTE).
Buy 1 x 265 Put, Aug 21, 2026, at $6.85, Sell 2 x 260 Put, Aug 21, 2026, at $4.70 each.
The structure enters for a net credit, never a debit. Delta 22.57, net long. I'm positioned for stabilization or a mild recovery, not a directional short.
Theta +$6.40 per day, so time helps every day MCD sits still. Vega -34.97. If implied vol contracts as the stock finds its footing, that helps the position too. Probability of Profit 76%.
Management
If the short 260 puts are breached before that, split the position in two:
- Long 265 Put + Short 1 × 260 Put = put debit spread. At breach, this spread collects 100% of profit on that leg.
- Remaining Short 260 Put = naked put. Roll it down and out in time for credit, and sell a call against it to convert into a short strangle. The strangle raises PoP and gives much more time to be right.
For small accounts
The ratio spread requires roughly $8,000 in buying power, so if that's too large, the credit spread runs the same directional thesis at $340.
- Buy 1 × 260 Put, Aug 21, 2026, at $4.95
- Sell 1 x 265 Put, Aug 21, 2026, at $6.05
Net credit: $160, Max loss: $340, Probability of Profit 61%, Delta 7.64, Theta 0.358.
The tradeoff is that it's more binary. No enhanced profit zone, no split-and-manage path if the short strike gets breached. This is why it has to be managed as a campaign, never as a standalone trade.
Management: exit at 50% of max profit ($80) or 21 DTE. If the short 265 put is breached with momentum before 21 DTE, close the spread (no splitting, no conversion to undefined risk). The entire value of this structure is the defined loss ceiling, so protect it.
What this trade really says
Long-term investors buy McDonald's below its moving averages and hold forever. One outcome, one path to profit, no income while they wait.
Premium sellers collect the credit today, we have three scenarios instead of one. Theta accruing daily while the chart stays broken. And the best single outcome on this position is MCD at $260 at expiry, meaning the trade pays more if the stock goes lower before recovering than if it just snaps straight back.
That's the amazing asymmetry the buy-and-hold investors aren't running.
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Collecting Premium on a World-Class Franchise Sitting Below Every Moving Average
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