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Ford Motor Company (F) Trader Makes a Gutsy Call Ahead of Earnings

Ford Motor Company will report second-quarter earnings the morning of July 24

by 7/10/2014 9:43 AM
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Bullish betting has ramped up on Ford Motor Company (NYSE:F), ahead of the company's turn in the earnings confessional the morning of Thursday, July 24. It was just more of the same on Wednesday, where calls ran at a 16% mark-up to the daily average -- and outpaced puts by a nearly 8-to-1 margin. Short-term contracts were in demand, per F's 30-day at-the-money implied volatility, which rose 4.5% on the day to close at 21.1%.

Drilling down, notable buy-to-open activity was detected at the equity's weekly 7/25 18-strike call. The majority of the action here occurred when one block of 9,493 contracts crossed at an ask price of $0.13 each, resulting in an initial net debit of $123,409 (number of contracts * premium paid * 100 shares per contract). This also represents the maximum risk to the trader, should F settle below the strike at the close on Friday, July 25 -- when the weekly options expire. Profit, meanwhile, will accrue with each step above breakeven the stock takes.

On the charts, F has been in rebound mode since hitting its most recent low of $15.43 on May 7, thanks to a couple of bounces off its rising 320-day moving average. However, the shares have not traded north of the aforementioned breakeven mark since January 2011, and were most recently seen lingering near $17.24.

As noted, though, Ford Motor Company (NYSE:F) is slated to report quarterly earnings two sessions before the weekly 7/25 series of options expires. The company has had a string of fundamental wins lately, including an upbeat reading on first-half sales in Europe. Plus, over the past eight quarters, the stock has averaged a single-session post-earnings gain of 0.3%. For F's second-quarter, analysts are calling for a per-share profit of 38 cents -- a 7-cent decline from the company's year-ago results.


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