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Ford Motor Option Players Predict a Recovery

F fans are flocking to March-dated calls

by 1/31/2013 2:38 PM
Stocks quoted in this article:

Options speculators are betting on a rebound for Ford Motor Company (NYSE:F - 12.98), with traders picking up March-dated calls. In afternoon trading, F has seen roughly 111,000 of these bullish bets change hands -- more than double the number of puts traded. For comparison, the Detroit darling typically sees about 86,000 calls exchanged by now, on average.

Most popular has been the March 13 call, where more than 41,000 contracts have traded at a volume-weighted average price (VWAP) of $0.39. With fewer than 25,000 calls in open interest, and considering most of today's calls traded at the ask price, we can assume that a healthy portion of the volume consists of newly bought bullish bets.

By purchasing the calls to open, the traders expect F to muscle back atop the $13.39 level (strike plus VWAP) by mid-March, when the options expire. Nevertheless, the most the buyers stand to lose is the initial premium paid, should the stock extend its post-earnings retreat.

Slightly shorter-term option bulls are scooping up the weekly 3/1 12.50- and 13-strike calls, which have seen about 7,700 and 7,300 contracts change hands, respectively. Volume has exceeded open interest at both strikes, and most of the weekly calls crossed at the ask price, once again hinting at buy-to-open action.

By buying the 12.50-strike calls at a VWAP of $0.57, the speculators are looking for F to topple the $13.07 marker by the closing bell on Friday, March 1. Meanwhile, the 13-strike calls crossed at a VWAP of $0.29, indicating a breakeven level of $13.29 for the buyers.

At last check, F has tacked on 0.4% to hover just shy of the $13 marker -- an area that contained the security's rally attempts in the first part of 2012, and could resume its role as a technical speed bump.


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