Option traders have been placing bets on automakers General Motors Company (NYSE:GM) and Ford Motor Company (NYSE:F) in recent weeks that are at odds with the stocks' respective technical trajectories. Call buying has been popular on GM, despite the equity's dismal recent retreat, while put buying has been picking up speed on F, as the stock makes a run at multi-year highs.
General Motors Company (NYSE:GM)
Over the course of the past five sessions, speculators at the Chicago Board Options Exchange (CBOE) have bought to open 17,173 calls versus 16,108 puts on GM, resulting in a call/put volume ratio of 1.07. Widening the scope to include data from the International Securities Exchange (ISE) and NASDAQ OMX PHLX (PHLX) -- and expanding the time frame to four weeks -- yields similar results. Specifically, the equity's 20-day ISE/CBOE/PHLX call/put volume ratio stands at 1.08.
As noted, this modestly bullish positioning among option trades runs counter to the equity's technical performance. Amid GM's well-documented fundamental woes, the stock has surrendered 18% in 2014. More recently, the shares have lost nearly 10% over the past two weeks due to a second-quarter earnings miss, and are now churning below the $34 mark -- an area that served as support in March, but could now be switching roles to act as resistance.
Elsewhere, on the Street, expectations among the brokerage bunch remain high for the troubled automaker. Roughly 62% of covering analysts maintain a "buy" or "strong buy" recommendation toward General Motors, while the consensus 12-month price target of $43.73 stands at a steep 30% premium to GM's current perch at $33.63 -- and in territory yet to be charted. From a contrarian perspective, a round of downgrades and/or price-target cuts could be in GM's future, which may trigger an additional wave of selling pressure on the stock.
Ford Motor Company (NYSE:F)
Bears have been present in F's options pits of late, per the stock's five-day put/call volume ratio of 1.43 on the ISE. Including data from the CBOE and PHLX -- and widening the time frame to two weeks -- results in a 10-day ISE/CBOE/PHLX put/call volume ratio of 0.30, which ranks in the 66th percentile of its annual range. Simply stated, puts have been bought to open (relative to calls) at an accelerated clip in recent weeks.
Technically speaking, F has put in a strong outperformance against its sector peer, with the shares up more than 10% year-to-date. Additionally, the stock tagged a three-year high of $18.12 late last month in the wake of its well-received second-quarter earnings report, but was more recently seen lingering near $17.06. This area coincides with peak put open interest at the August 17 strike, suggesting this level may serve as a short-term foothold for F, as the hedges related to these bets unwind over the next two weeks.
Against Ford's flexing of technical muscle, sentiment outside of the options arena has tilted toward the bullish side. For starters, short interest accounts for less than 2% of the stock's available float. What's more, eight "buy" or better ratings are levied toward the equity, compared to five tepid "holds," and zero "sells."
The Case for Big Moves in IWM and QQQ
Featured Partners: AOL DailyFinance
© 2014 Schaeffer's Investment Research, Inc. 5151 Pfeiffer Road, Suite 250, Cincinnati, Ohio 45242
Phone: (800) 448-2080 FAX: (513) 589-3810 Int'l Callers: (513) 589-3800 Email: firstname.lastname@example.org
All Rights Reserved. Unauthorized reproduction of any SIR publication is strictly prohibited.
Market Data provided by QuoteMedia.com | Data delayed 15-20 minutes unless otherwise indicated.