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Ahead of tomorrow's sales release, Ford Motor Company (NYSE:F) is up 0.1% at $13.67. However, it looks like options traders are rolling the dice on a dip this week, with speculators scooping up weekly puts. So far today, the automaker has seen roughly 11,000 puts cross the tape, compared to fewer than 7,600 call options.
Digging deeper, most of the action has centered around the weekly 5/3 13.50-strike put, which has seen around 5,900 contracts change hands at a volume-weighted average price (VWAP) of $0.14. Most of the puts have traded on the ask side, and implied volatility is 4.1 percentage points higher, hinting at newly bought bearish bets.
In order to profit on the play, the buyers need Ford Motor Company to breach $13.36 (strike price minus VWAP) by the end of the week, when the options expire. (It's worth noting that Ford goes ex-dividend tomorrow, though dividend arbitrage usually consists of buying in-the-money puts.) Assuming this is a "vanilla" trade, the most the buyers stand to lose is the initial premium paid for the puts, should F remain north of $13.50 through Friday's close.
Expanding our sentiment scope, we find that today's appetite for bearish bets is just more of the same for Ford's short-term crowd. The security's Schaeffer's put/call open interest ratio (SOIR) of 0.78 stands just 2 percentage points shy of a 52-week peak. Or, in simpler terms, near-term options players have rarely been more put-biased during the past year.
What's more, now looks like an opportune time to gamble with Ford's short-term contracts. The equity's Schaeffer's Volatility Index (SVI) rests at 23%, above just 21% of all other readings of the past year. In other words, F's near-term options are relatively inexpensive right now. Plus, the stock's Schaeffer's Volatility Scorecard (SVS) stands at a lofty 87, implying that options are attractively priced relative to the probability of an outsized move on the charts.
As alluded to earlier, Ford is slated to report its April sales figures tomorrow. According to Edmunds.com, the company is expected to post slight year-over-year gains in domestic market share, and Kelley Blue Book estimated that sales of compact crossovers -- like the Ford Escape -- jumped 23%. However, some auto executives have expressed concern about the slumping Japanese yen, which is favorable for exporters like Toyota Motor Corporation (NYSE:TM).