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Option Brief: Ford Motor Company (NYSE:F) is slated to report first-quarter earnings next Friday, but has averaged a one-week post-earnings loss of 0.9% over the past eight quarters, and fell 7.4% in the five sessions following its last earnings report. On the charts, meanwhile, F is battling its 10-month moving average, which hasn't been toppled on a monthly closing basis since November. Nevertheless, it seems one options trader yesterday rolled the dice on an after-earnings pop for the shares.
The stock's weekly 5/2 16.50-strike call was most active by a mile, with nearly 16,700 contracts exchanged. Most of the calls crossed in a multi-exchange sweep, with the biggest block -- 12,360 contracts -- traded for $0.14 each, closer to the ask price at the time, suggesting they were bought. Plus, open interest skyrocketed by close to 15,700 contracts overnight, hinting at fresh bullish positions.
To profit on the play, the buyer needs F to be sitting atop $16.64 (strike plus premium paid) when the weekly options expire at the close on Friday, May 2 -- one week after the aforementioned earnings release. It would take an uptick of 3.7% from Ford's current price at $16.07, in order to topple breakeven -- a level not explored since January. Risk is limited to the initial premium paid for the calls, should F remain south of the strike through the options' lifetime.
Ford Motor Company (NYSE:F) traders this morning are digesting news of Lincoln's debut in China later this year. Elsewhere in the auto world, recall-plagued sector peer General Motors Company (NYSE:GM) is trading at a critical juncture ahead of its own earnings report.