Stocks quoted in this article:
Calls were popular on Ford Motor Company (NYSE:F - 11.52) throughout the course of Monday's session. Around 43,000 calls were traded, easily outpacing the 18,000 puts that changed hands. As Beth Gaston noted yesterday, F's February 12 call was the most active strike on the day. However, shorter-term speculators turned their attention to F's weekly series of options, where the 11.50 strike was popular on both the call and put sides of the fence.
Specifically, F's 12/14 11.50-strike call saw around 4,400 contracts trade on the day. The majority of these crossed at the bid price, and open interest rose overnight -- indicating sell-to-open activity. Elsewhere, nearly 2,600 contracts changed hands at F's 12/14 11.50-strike put. A healthy portion of these traded at the ask price, and implied volatility edged higher, suggesting new positions were bought to open here yesterday.
While these two strategies are both betting on F to finish the week below $11.50, the reward for the call sellers is limited to the net credit received, or $0.14, which Trade-Alert indicated was the volume-weighted average price (VWAP). Meanwhile, the put buyers will profit with each step south of breakeven at $11.34 (the strike minus the VWAP of $0.16) the stock takes through Friday.
Expanding the scope, the recent trend in the options pits has tended toward bullish bets. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open more than four calls for every put during the past 10 sessions. What's more, the call/put volume ratio of 4.13 ranks higher than 64% of other such readings taken in the past year, suggesting bullish bets have been scooped up over bearish at an accelerated clip over the last two weeks.
On the charts, F has been in a solid uptrend in recent months, with the shares adding nearly 31% since hitting an annual low of $8.82 on Aug. 2. However, the $11.50 mark has been a formidable foe, with the stock only finishing one daily close north of this level since Apr. 27.
The equity jumped 0.1% right out of the gate this morning, and was last seen churning around the $11.50 mark. Should this area continue to stand firm against F's advances, the aforementioned weekly option players could find themselves in a profitable position.