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Option Brief: Call volume in Ford Motor Company's (NYSE:F) options pits is running well ahead of the intraday average. So far today, around 93,000 calls are on the tape, compared to an expected total of roughly 31,000. Most active by far is F's weekly 1/3 17-strike call, where more than 55,000 contracts have traded.
Open interest at the aforementioned strike stood at just 2,026 contracts heading into today's session, and implied volatility is 4.2 percentage points higher, so it's safe to assume new positions have been created. With the majority of the calls trading off the ask price, we can say more specifically that the contracts were purchased to open -- a theory confirmed by data from the International Securities Exchange (ISE). Even the 22,894-lot that traded at the bid price represents a new long position, per Trade-Alert.
By buying the calls to open, today's bullish bettors expect F -- currently perched at $16.42 -- to muster a move past $17 by the close on Jan. 3, 2014. Should that gain fail to materialize, and the underlying is sitting below the strike price at expiration, traders who have held their options throughout the contracts' lifetime will forfeit the entire premium paid.
Although Ford Motor Company (NYSE:F) shares have tacked on nearly 44% on a year-over-year basis, they've sunk almost 9% since hitting a two-year high of $18.02 on Oct. 24. Part of that pullback can be traced to a Dec. 3 bear gap, after F revealed a relatively disappointing gain in November auto sales. In fact, vehicle sales could factor into today's bullish options speculation, as the automaker's December results are due out on Jan. 3 -- the same day the aforementioned options expire.