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Bulls Bet On Ford Motor Company (F) to Drive Higher

Ford Motor Company's weekly 4/11 15.50-strike call has taken center stage

by 3/25/2014 2:40 PM
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Ford Motor Company (NYSE:F) call volume outweighs put volume by a hefty margin this afternoon, 30,000 contracts versus fewer than 9,000. In the limelight is the automaker's weekly 4/11 15.50-strike call, where nearly 11,000 contracts (including a block of about 5,900) are on the tape -- easily outstripping the day's second most active option.

The majority of the calls at the weekly strike traded at the ask price, suggesting they were purchased. Also, volume outstrips open interest here, and implied volatility has ticked higher, indicating newly bought bullish bets. In short, these speculators expect F -- currently hovering 0.3% lower at $15.34 -- to muscle north of the strike by the closing bell on Friday, April 11. But no matter what happens, the most the traders risk losing is the initial premium paid.

Today's penchant for long calls over puts is business as usual in Ford's options pits. During the last 10 weeks on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock has racked up a call/put volume ratio of 3.86 -- higher than 83% of similar readings from the previous year.

Why traders are so bullish about Ford Motor Company (NYSE:F) is anyone's guess. The shares are in the red on a year-to-date basis, and up less than 16% year-over-year. Meanwhile, on the horizon is the car manufacturer's March sales release, scheduled for next Tuesday. Should those results disappoint and/or the stock continue to struggle on the charts, a shift in sentiment among option bulls could exacerbate F's losses.


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