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Ford Motor Company (NYSE:F) is up 3.5% to trade at $16.91 this afternoon, following the car maker's sales report for August. Specifically, retail sales surged by 20% to the highest levels since August 2006, while total sales increased by 12% from 2012. In response to the news, F's options activity has spiked to nearly three times its intraday average. Most of this action has taken place on the call side, where roughly 80,000 contracts -- three times the norm -- have changed hands so far.
Standing at the top of F's most active options list today is the weekly 9/6 17-strike call. At this strike, 13,389 contracts have crossed for a volume-weighted average price (VWAP) of 0.06. The lion's share of the contracts went off at the ask price, and volume outweighs open interest, suggesting the initiation of long calls at this strike. In addition, data from the International Securities Exchange (ISE) confirms our theory of buy-to-open activity.
By purchasing these near-the-money options, today's call buyers anticipate F will edge north a mere 0.9%, to topple the breakeven price of $17.06 (strike price plus the VWAP) by Friday's close, when the options expire. Should F instead remain below the 17 strike upon expiration, the most the call buyers stand to lose is the initial premium paid. This would be nothing to lose sleep over, however, considering Ford's Schaeffer's Volatility Index (SVI) of 24% ranks lower than 78% of all other such readings taken over the past year, indicating that short-term options are cheaper than usual right now, relatively speaking.
Technically speaking, Ford Motor Company (NYSE:F) has been moving sharply higher of late. In fact, over the last year, the stock has tacked on an impressive 78.6%, and recently tested support at its 80-day moving average.
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