Put Volume Accelerates as Ford Stock Sinks

Ford stock has taken a 19% haircut since its July peak

Managing Editor
Oct 2, 2019 at 2:45 PM
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It's a bloodbath on Wall Street today, and Ford Motor Company (NYSE:F) is not exempt from the selling. The automaker reported a 5% decline in U.S. auto sales for the third quarter, thanks to lower-than-expected figures for its Taurus and Mustang vehicles. F stock is down 4.1% to trade at $8.52 at last check, on track for its worst day since July 25. And on top of that, options bears are revving their engines.

So far today, 105,000 put options have changed hands, six times the average intraday rate, and volume pacing in the 99th percentile of its annual range. Leading the charge is the November 8 put, where there are new positions being initiated. However, data suggests sell-to-open activity at this back-month strike, meaning speculators are betting on $8 to serve as a short-term floor for Ford stock.

It's worth noting that the lifetime of this option encompasses Ford's third-quarter earnings report, set for release after the close on Wednesday, Oct. 23, and the put writers may be hoping to capitalize on a post-earnings volatility crush. For reference, Ford stock hasn't closed south of $8 since Jan. 3. But since a July 15 annual high of $10.56, F has shed 19%, with breakout attempts last month thwarted by its 50-day moving average.

Daily Stock Chart F

More broadly speaking, Ford's 10-day call/put volume ratio of 3.59 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) indicates long calls outnumbered puts by a more than 3-to-1 margin in the past two weeks. Plus, this ratio ranks in the 93rd percentile of its annual range, meaning the rate of call buying relative to put buying has been accelerated.

Drilling down, the weekly 10/4 8.50-strike call has seen the biggest increase in open interest over this two-week time frame, with more than 23,250 contracts added. Data from the major options exchanges confirms buy-to-open activity here, indicating bulls are anticipating a quick bounce by the close this Friday, Oct. 4.


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