Ford Stock Higher After Goldman Sachs Takes the Wheel

Ford calls are flying off the shelves today, suggesting a potential shift in sentiment

by Patrick Martin

Published on Oct 29, 2018 at 1:42 PM

Auto giant Ford Motor Company (NYSE:F) has seen heavy options trading in recent weeks, landing on Schaeffer's Senior Quantitative Analyst Rocky White's list of 20 S&P 500 Index (SPX) stocks that saw the most options activity in the past 10 days. Names highlighted yellow are new to the list. Today, Ford stock is up 4% to trade at $9.35, thanks to a notable upgrade, but the attitude in the options pits has been rather pessimistic -- until now. 

MAO Oct 29

Earlier today, Ford received an upgrade to "buy" from "neutral" at Goldman Sachs, as well as a price-target hike to $12 from $9 -- representing a 34% premium to Friday's close of $8.98. The analyst in coverage thinks a "refreshed product cadence" and cost improvements will soon benefit the stock. In addition, auto stocks in general are enjoying some sector tailwinds after a Chinese regulator reportedly proposed a 50% cut to its car purchase tax.

Today, F shares are on track to close above their 50-day moving average for the first time since late June. Last week, Ford stock fell to an eight-year low of $8.17 on Wednesday. The shares bounced from there, though, on an upbeat quarterly report the very next day, gaining 9.9%, and ultimately turned in their best week since late April. 

MAO F Oct 29

Despite the upgrade today, analysts have been skeptical of Ford stock for some time now. Of the 11 brokerages covering the equity, eight rate it a tepid "hold," and its average 12-month price target of $9.94 is only a chip-shot from the security's current perch. 

In the options pits, data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows F puts have been incredibly popular recently. This is shown in its 10-day put/call volume ratio of 0.82, which ranks in the 100th of its annual range. While this ratio indicates calls have outnumbered puts on an absolute basis, the lofty percentile suggests the appetite for bearish bets has been much healthier than usual. Digging deeper, the November 8 put saw a healthy increase in open interest during this time frame, with nearly 34,000 contracts added.

Today, options traders are singing a different tune. Ford calls have crossed the tape at five times the average intraday pace, with more than 154,000 exchanged. Much of the activity has transpired at the December 10 call, where Trade-Alert indicates one speculator bought to open 25,000 contracts to bet on more upside for F in the next couple of months.


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