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Ford Motor Company (F) Traders Bet On a Quick Breakout

Ford Motor Company has not closed north of $17.50 since July 29

by 8/29/2014 10:49 AM
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Ford Motor Company (NYSE:F) has spent the month of August wallowing beneath the $17.50 mark, and in today's session, the stock is hovering just below here, at $17.44. This isn't stopping a number of option traders from gambling on a quick breakout above this recent area of resistance by next Friday's close.

Taking a step back, calls are trading at a slightly faster-than-usual clip today, and are outpacing puts by a nearly 7-to-1 margin. The majority of the day's action has centered on the weekly 9/5 17.50-strike call, where 9,188 contracts have traded -- mostly at the ask price, hinting at buyer-driven activity. Implied volatility has jumped 3.1 percentage points, and volume outstrips open interest, making it safe to assume new positions are being initiated.

Based on the volume-weighted average price (VWAP) of $0.13, F needs to be sitting at or above $17.63 (strike plus VWAP) at next Friday's close -- when the weekly series expires -- in order for today's call buyers to profit. Risk, meanwhile, is limited to the initial cash outlay, should the security settle south of the strike price at expiration.

Looking ahead, Ford Motor Company (NYSE:F) could be poised to start September on a dismal note. Specifically, the auto issue is scheduled to unveil its August sales numbers ahead of next Wednesday's open, and following the release of its July sales report earlier this month, the stock shed 1.2% in the subsequent session. Elsewhere on the fundamental front, a judge in New York dismissed a 12-year-old apartheid lawsuit against Ford and International Business Machines Corp. (NYSE:IBM), saying the case was out of U.S. jurisdiction.


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