Ford Motor Company (F) Option Traders Refuse to Panic

Call buying and put selling have been popular strategies in Ford Motor Company's (NYSE:F) options pits

by Karee Venema

Published on Feb 2, 2016 at 3:06 PM
Updated on Jun 24, 2020 at 10:16 AM

Ford Motor Company (NYSE:F) is tumbling today, after January sales data and disappointing earnings from Ferrari NV (NYSE:RACE) have sent the auto sector into a tailspin. Ford, specifically, couldn't maintain its 2015 momentum, and reported a 2.6% drop in sales last month. At last check, the stock was down 4.9% at $11.47 -- bringing its year-over-year deficit to 27% -- and option traders are pouncing.

Puts are the options of choice -- trading at 1.8 times what's typically seen at this point in the day, and outpacing calls by a 2-to-1 margin. Not all of the day's put volume is of the traditional bearish variety, with sell-to-open activity detected at the February 11.25 strike -- F's most active option. In other words, these speculators expect the $11.25 level to hold as support through the close on Friday, Feb. 19 -- when front-month options expire. 

Widening the sentiment scope reveals today's bias toward short puts is nothing new for F. Over the past 10 sessions at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have sold to open 2.36 puts for each one they've purchased.

While put players have been taking this neutral-to-bullish stance, call players have been purchasing new positions at a rapid-fire rate in recent weeks. In fact, F's 10-day ISE/CBOE/PHLX call/put volume ratio of 6.99 sits higher than 98% of all comparable readings taken in the past year.

In the front-month series, peak call open interest of more than 50,800 contracts is housed at the February 14.75 strike. For those who have bought to open the calls, the goal is for F to rally above $14.75 by front-month options expiration. The last time the stock traded north of this mark was in late November. Should Ford Motor Company (NYSE:F) fail to topple $14.75 in the next few weeks, though, the most any call buyer stands to lose is the initial premium paid.

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