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Since peaking at $14.30 in mid-January, the shares of Ford Motor Company (NYSE:F - 12.69) have surrendered more than 5%, and are poised to end south of their 50-day moving average for the first time since late August. Nevertheless, one options trader is expecting the automaker to stage a significant recovery over the long term.
Around midday, F has seen roughly 51,000 calls change hands -- a 33% mark-up to its average intraday call volume. For comparison, about 27,000 F puts have traded thus far.
Garnering the most attention has been the January 2015 20-strike call, which has seen more than 13,100 contracts cross the tape on open interest of 7,825 contracts, pointing to newly opened positions. Digging even deeper, most of the action transpired in one fell swoop, with a block of 12,854 contracts exchanged for $0.38 -- closer to the ask price at the time, suggesting they were bought.
By purchasing the LEAPS to open, the buyers are betting on F to power north of the $15 marker within the next couple of years -- a feat not accomplished since mid-2011. More specifically, the buyers will make money if F topples the $15.38 level (strike plus premium paid) by the time January 2015 options expire. However, even if F extends its recent slide, the most the buyers can lose is the initial premium paid for the calls.
As alluded to earlier, the shares of F are on pace to finish beneath their 50-day trendline for the first time in months. This formerly supportive moving average could now switch roles to serve as resistance. From a longer-term perspective, the equity could also struggle beneath the $13 region, which has contained F's rebound attempts since June 2011.