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Ford Motor Company (NYSE:F) is on pace to close a second consecutive session north of $16 -- a feat not accomplished since February 2011. The positive price action has today's option players upping the bullish ante, and looking for a move north of $17 over the next two months. Traders are targeting the out-of-the-money August 17 and September 17 calls. Of the collective 23,528 contracts traded at these calls, nearly all have gone off on the ask side, implied volatility has ticked higher at both positions, and volume is outstripping open interest. Summing it all up, it appears new bullish positions are being initiated.
The back-month August 17 calls are trading for a volume-weighted average price (VWAP) of $0.37, meaning traders will profit with each step north of $17.37 (strike price plus VWAP) F takes through the close on Aug. 16. This breakeven mark represents expected upside of 5.7% from the stock's current perch at $16.43.
Meanwhile, the buyers of the September 17 calls are allowing more time for their bullish bets to come to fruition, and are, therefore, paying more for the options. Specifically, the VWAP for the further-dated calls is $0.51, making breakeven $17.51. Should the stock fail to topple the strike price at either call before their respective expirations, the most both groups have on the line is the initial premium paid.
Calls have been preferred over puts, per the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.49. This ratio not only indicates that calls more than double puts in the front three-months' series of options, but it ranks lower than 99% of similar annual readings. In other words, short-term speculators have rarely been more call-heavy.
This call-skewed trend isn't surprising when looking at F's technical backdrop. The equity has added almost 27% in 2013. This upward momentum was highlighted today, when F jumped to a new two-year peak of $16.45 in the last hour of the shortened session.