Short-Term Option Bears Blast Ford Motor Company (F)

Ford Motor Company (NYSE:F) puts are trading at an accelerated clip today

by Karee Venema

Published on May 20, 2016 at 1:29 PM
Updated on Jun 24, 2020 at 10:16 AM

Ford Motor Company (NYSE:F) is trading higher today along with fellow automaker Tesla Motors Inc (NASDAQ:TSLA), despite reports that Ford India has recalled 48,000 EcoSport compact SUVs. At last check, F stock was up 0.8% at $13.20, yet its put options are flying off the shelves.

Specifically, around 25,000 put options have changed hands so far -- 1.7 times the average intraday pace, and more than three times the number of call options exchanged. In fact, F's put/call volume ratio of 3.07 ranks in the 99th annual percentile.

The bulk of F's put volume has centered on the June 11.75 strike, where a block of 15,000 contracts traded shortly before lunchtime. According to Trade-Alert, these puts were bought to open for an initial cash outlay of $90,000 (number of contracts * $0.06 premium paid * 100 shares per contract). This also represents the most the put buyer stands to lose should the soon-to-be front-month options expire out of the money at the close on Friday, June 17. Profit, meanwhile, will accumulate on a move south of breakeven at $11.69 (strike less premium paid).

More broadly speaking, today's accelerated put volume just echoes the withstanding trend in F's options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Ford's 10-day put/call volume ratio of 0.85 rests just 9 percentage points from a 52-week peak.

Echoing this is the equity's Schaeffer's put/call open interest ratio (SOIR) of 1.49. Not only does this show that put open interest outweighs call open interest among options set to expire in three months or less, but it ranks above 87% of all comparable readings taken in the past year. In other words, short-term speculators are more put-heavy than usual toward F.

Now appears to be an opportune time to place short-term bets on Ford Motor Company (NYSE:F). The stock's Schaeffer's Volatility Index (SVI) of 24% sits lower than 70% of similar readings taken in the last 12 months, while its 30-day at-the-money implied volatility of 23.4% is docked in the 37th annual percentile. Simply stated, premium on F's near-term options is pricing in relatively low volatility expectations at the moment.

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