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Ford Motor Company (F) Option Bear Rolls the Dice on More Losses

Ford Motor Company's out-of-the-money December 13 put is most active today

by 5/15/2014 2:48 PM
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Option Brief: Puts are changing hands at a faster-than-usual clip on Ford Motor Company (NYSE:F), which is in the red for a second straight session, despite yesterday morning's upbeat European sales release. So far today, roughly 18,000 puts have crossed the tape, representing a 27% mark-up to what is typically seen at this time of day.

More than one-quarter of today's put activity has transpired at the December 13 strike, thanks to one skeptical option player. To be specific, almost all of the puts at this strike traded as a sweep of 4,999 contracts across multiple exchanges around midday. It appears the speculator has created long bearish positions on Ford, considering the puts were bought for an ask price of $0.28 apiece, and volume exceeds current open interest at the strike, pointing to buy-to-open activity.

With his play, today's option bear is betting on Ford -- currently down 1.1% at $15.57 -- losing an additional 18.3% in order to fall below breakeven at $12.72 (strike minus the ask price) by December options expiration in seven months. Of note, however, Ford has not dipped below the $13 mark on an intraday basis in more than a year. Should the stock maintain its position above this level through expiration, the most today's option player stands to lose is the initial premium paid.

This bearish bias isn't surprising, considering Ford Motor Company (NYSE:F) shares have tumbled 7.2% from their Jan. 17 year-to-date high of $16.78. What's more, the stock seems to have gained a newfound layer of resistance in the form of its 10-day moving average, after tumbling below this trendline in late April following a worse-than-expected earnings report.


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