Stocks quoted in this article:
Pessimistic speculators have descended upon Ford Motor Company (NYSE:F), today despite the stock receiving a price-target hike to $20 from $15 at UBS this morning. Approximately 41,000 puts have changed hands thus far, which is more than double the security's anticipated intraday volume. It appears that a significant number of options players are expecting the auto giant to falter over the next few weeks.
Most active has been the at-the-money July 15 put, which has seen over 11,300 contracts cross the tape at a volume-weighted average price (VWAP) $0.38. Although some of this volume is flagged as "sold to open," a hefty portion traded at the ask price, signaling buyer-fueled activity. Since this option holds open interest of just 6,108 contracts -- and implied volatility was last seen 1.7 percentage points higher -- it's likely that fresh bearish bets have been added here, as well.
By purchasing these soon-to-be front-month puts to open, traders are betting on F to slide south of $14.62 (strike price less the VWAP) by the close on July 19. This reflects a drop of 2.5% from the stock's current price at $15. However, should the shares remain north of the strike, these put buyers will only be forced to part with the initial premium paid for their long positions.
Ford Motor Company is no stranger to bearish speculation among the near-term options crowd, though. The equity's Schaeffer's put/call open interest ratio (SOIR) checks in at 1.04, confirming puts outweigh calls among options with a shelf-life of three months or less. This ratio is just 9 percentage points below a 12-month high, meaning short-term traders have rarely been more put-heavy toward the stock during the past year.
From a technical standpoint, this lack of faith in F seems unfounded, as the equity has climbed nearly 16% in 2013, and almost 41% on a year-over-year basis. Additionally, the shares have outperformed the broader S&P 500 Index (SPX) by more than 11 percentage points during the past two months. In other words, an unwinding of skepticism in the options pits could translate into a contrarian tailwind for F.