Will Stellar Auto Sales Spook Ford Motor Company (F) Bears?

Ford Motor Company (NYSE:F) option traders have been picking up puts at a rapid-fire rate

Sep 1, 2015 at 12:53 PM
facebook twitter linkedin

While most stocks are swimming in red ink, automaker Ford Motor Company (NYSE:F) is among the elite on the right side of breakeven. The shares were last seen 0.9% higher at $14, thanks to encouraging domestic auto sales, which are on pace for the best year since 2001. The upbeat figures could spook a few options traders, who have been upping the bearish ante on F in recent weeks. 

Getting back to the monthly numbers, Ford last month enjoyed a 5.6% increase in U.S. sales --which hit their best level in nine years -- surprising analysts expecting a 0.2% decline. Plus, a Ford economist waxed optimistic on the industry, predicting performance to remain strong through 2015. 

As alluded to earlier, F's options crowd might not be too happy about the stock bucking the trend. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 50-day put/call volume ratio of 0.46 stands higher than 96% of all other readings from the past year. In other words, option buyers have initiated bearish bets over bullish at a near annual-high clip during the past 10 weeks.

Echoing that, the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.01 registers in the 83rd percentile of its annual range, implying that near-term traders are more put-biased than usual.  In the front-month September series, the out-of-the-money 12.50 strike has seen the biggest increase in put open interest during the past two weeks, with more than 22,000 contracts added. The puts will move into the money if F sinks beneath $12.50 by the close on Friday, Sept. 18, when the options expire. 

The September 12.50 put is most active today, too, with nearly 3,600 contracts exchanged. It appears most of the action is of the buy-to-open variety, with traders paying a volume-weighted average price (VWAP) of $0.12. As such, the buyers' profit will accumulate the further F sinks south of $12.33 (strike minus VWAP) within the options' lifetime, while risk is capped at the initial premium paid. 

However, Ford Motor Company's (NYSE:F) Schaeffer's Volatility Index (SVI) sits at 37% -- above three-quarters of all other readings from the past year. Simply put, the stock's near-term options are fetching higher-than-usual premiums, relative to historical volatility expectations.

Minimize Risk While Maximizing Profits

There is no options strategy like this one, which consistently minimizes risk while maintaining maximum profits. Perfect for traders looking for ways to control risk, reduce losses, and increase the likelihood of success when trading calls and puts. The Schaeffer’s team has over 41 years of options trading success targeting +100% gains on every trade. Rest assured your losses are effectively limited to your initial cost at the time of making your move! Don't waste another second... join us right now before the next trade is released! 


300x250 - Banner 3 - v1