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Ford Motor Company (NYSE:F) proved to be popular with the bulls yesterday, as roughly 62,000 calls crossed the tape throughout the session. This was a 32% mark-up over the norm, and more than triple the number of puts exchanged. Taking a closer look at the data, it appears that some traders are counting on the auto giant to trek higher over the next couple of weeks -- a time frame that also happens to encompass F's August sales report on Sept. 4. It should also be noted that the stock's 30-day, at-the-money implied volatility climbed 3.1 percentage points (or 13.1%) during Tuesday's trading to close at 27.1%.
The clear front-runner on Tuesday was the weekly 9/13 16.50-strike call, where north of 7,000 contracts changed hands at a volume-weighted average price (VWAP) of $0.17. The vast majority of these short-term calls traded at the ask price, while open interest spiked by 6,169 contracts overnight, confirming the creation of new bullish bets.
By purchasing the calls to open, speculators are counting on F to surmount the breakeven rail of $16.67 (strike price plus the VWAP) by the close on Sept. 13, when these weekly options expire. This denotes expected upside of about 5.6% to the security's current price of $15.78. At last check, the delta for this call was docked at 0.23, meaning it has a nearly 1-in-4 chance of finishing in the money.
However, even if Ford remains below the strike price throughout the option's lifetime, the most yesterday's call buyers will forfeit is the initial premium paid. The traders can also rest easy in knowing that the stock's Schaeffer's Volatility Index (SVI) of 23% ranks lower than all but 22% of similar readings taken during the past year -- implying F's short-term options are relatively cheap at the moment.
From a longer-term perspective, Ford Motor Company (NYSE:F) has put in a solid technical performance, gaining close to 22% year-to-date, and almost 70% year-over-year. However, the shares have struggled in recent weeks, during which the company also slashed the fuel-economy rating for its C-Max hybrid. Since peaking at a two-year high of $17.67 on July 24, F has surrendered 10.7% of its value.
On a more savory note, though, F is commemorating Aug. 31 (International Bacon Day) by "wrapping" 2014 Ford Fiestas in -- you guessed it -- bacon. That's right ... company officials confirmed that Fiesta drivers can now purchase their rides fully wrapped in the popular pork product, or opt for bacon racing strips.