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High-Rolling Call Buyer Targets Slumping Ferrari Stock

One options traders is betting millions on a Ferrari stock turnaround

Nov 27, 2018 at 2:36 PM
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Ferrari N.V. (NYSE:RACE) call volume running wild today, with more than 4,800 contracts crossing, compared to a daily average of just 667. Trade-Alert notes that more than half the volume has taken place at the February 2019 105-strike call, where one speculator loaded on more than $2 million worth of options -- almost 2,800 contacts in total -- via multiple trades throughout today's session. The trader seems to be betting on RACE stock running higher above $105 in the coming months, with the shares last seen just above the strike at $105.41, down 3.5% on the day.

Today's price action is just more of the same from the automaker, which has been trending lower since its June peak near $150. In just the past three months, the equity has lost almost 19% of its value, and is flirting with its 52-week low from January, with this area also home to the year-to-date breakeven point. Taking a broader view, the security is set for a second straight close below the 12-month, or one-year, moving average.

race stock chart

Not only is today's seven-figure call buyer betting against Ferrari's recent technical performance, but they're also venturing from the recent put-buying trend seen from RACE options traders. More specifically, data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows a 10-day put/call volume ratio of 1.67, which ranks in the 94th annual percentile, showing a stronger-than-normal demand for long puts.

As such, it's not surprising to see put open interest greatly outweighing call open interest, 27,549 to 11,658. The former number ranks in the high 94th annual percentile, while the latter sits in just the 15th annual percentile. Regardless of which way you bet, anyone buying premium right now is dealing with elevated volatility expectations based on the 30-day at-the-money implied volatility of 33%, landing in the 88th annual percentile.


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