Options Alert: Dividend Capture in Coke & McDonalds (KO, MCD)

Posted in General, Options 
November 27th, 2010

McDonald’s Corporation (NYSE: MCD) and The Coca-Cola Company (NYSE: KO) are not stocks we generally associate with dividend capture trades, or dividend stripping trades.  On Friday, there were two major groupings of large call options trades out in January 2011 expiration.

We confirmed with Joe Kunkle of OptionsHawk.com that these were dividend stripping trades.  It was obvious that was the trade, but it is often better to hear from options industry insiders.  Kunkle noted, “The heavy options trading in Coca Cola and McDonald’s on Friday were not directional bets, just an arbitrage strategy known as dividend stripping seen it most every stock ahead of it’s ex-dividend date.”

These dividend captures represent millions of shares on a fully leveraged basis.

McDonald’s Corp. (NYSE: MCD) JAN11 CALLS:
CALL$    Volume    OpInt
50.00    17,300    89
55.00    118,600    5,609
57.50    3,200    386
60.00    259,110    12,644
62.50    2,000    260
65.00    248,016    12,994
67.50    27,070    2,410
70.00    241,166    21,094

The Coca-Cola Company (NYSE: KO) JAN11 CALLS:
CALL$    Volume    OpInt
30.00    9,800    705
35.00    3    1
37.50    20    15
40.00    920    115
42.50    20    90
45.00    6,000    533
47.50    19,500    1,262
50.00    273,000    15,205
52.50    116,518    6,244
55.00    536,030    29,513
57.50    243,090    16,519

There is no such thing as free money, but sometimes there is the next closest thing.

JON C. OGG

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