Options Traders Shift Gears On Ford Motor Company's (F) Post-Earnings Skid

Ford Motor Company (F) is sliding down the charts after a less-than-glowing earnings report

Jan 26, 2017 at 2:48 PM
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Ford Motor Company (NYSE:F) reported quarterly earnings this morning, matching analysts' estimates, even after changes to its plans for a small car plant in Mexico led to a $200 million hit. The shares have dropped off 3.1% to $12.40, even after CEO Mark Fields' upbeat comments regarding a recent meeting with President Donald Trump. Today's price action may be a direct result of the overblown optimism heading into the automaker's earnings -- a notion reflected by today's less-than-bullish options action.

In recent weeks, speculators have been targeting F calls at a near-extreme rate. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for instance, nearly four of the stock's call options have been purchased for each put over the last 10 sessions. The resulting call/put volume ratio of 3.96 ranks higher than 93% of all readings from the last 12 months. Likewise, F's Schaeffer's put/call open interest ratio (SOIR) of 0.34 is just 1 percentile from an annual low -- indicating near-term options traders have almost never been more call-heavy in the past year.

Digging down, F is among the stocks that saw the highest options volume over the last two weeks, with more than 637,000 calls and nearly 194,000 puts changing hands. The March 12 call and weekly 1/27 13-strike call saw the largest rises in open interest over the period, with notable buy-to-open action spotted at each.

Today, calls are crossing the tape at about 1.5 times the typical intraday rate, with the March 12 call topping the action. But it appears many of these contracts are being closed today. Meanwhile, some traders seem to be purchasing new positions at the weekly 2/3 12.50-strike put. The put buyers are betting on F shares continuing their slide below the $12.50 level through next Friday's close, when the weekly options expire. Near-term options buyers are likely looking to benefit from a post-earnings volatility crush, as F's 30-day at-the-money implied volatility is now in the low 17th percentile of its annual range, at 21.8%.

Technically speaking, F doesn't have much to brag about -- today's slide has the stock up just 0.5% on a year-over-year basis. Still, the shares are holding onto support above the rising 60-day moving average, which currently corresponds with a 61.8% Fibonacci retracement of Ford Motor Company's (NYSE:F) 2016 lows and highs.

F Daily Chart January 26

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