Options Traders Call Bottom On Ford Slide

Calls have been preferred for some time now

Managing Editor
Oct 24, 2019 at 2:36 PM
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While Tesla (TSLA) shocked the auto world with its earnings beat yesterday evening, Ford Motor Company (NYSE:F) hasn't been so lucky. Ford shares are down 7% to trade at $8.56, after the carmaker cut its full-year earnings forecast, citing weak demand in China and higher warranty costs.  

Also weighing on Ford is a 50-cent price-target cut to $9 from $9.50 at RBC. There's certainly room for more bear notes, considering the security's consensus 12-month price target of $10.36 is a 20.8% premium to its current perch. Ford stock is on track to post its worst single-session drop since July 25, although the $8.40-$8.50 level has once again emerged as support. 

MAO F Oct 24

In response to today's slide, Ford options traders have come out of the woodwork with an emphasis on calls. With just under two hours left in trading, more than 140,000 calls have crossed the tape so far -- five times the average intraday amount, and volume pacing for the 99th percentile of its annual range. Leading the charge today is the January 2020 10-strike call, where it looks like options traders are selling their positions to close. There are also new positions being opened at the weekly 11/1 8.50-strike call, where buyers are eyeing that supportive $8.50 level for the next two weeks.

Options traders have been more keen to make a play on the auto name lately. The stock just popped up on Schaeffer's Senior Quantitative Analyst Rocky White's list of stocks that have attracted the highest weekly options volume during the past 10 days, with names highlighted in yellow new to the list. In the last two weeks, roughly 260,987 weekly calls have changed hands on F, compared to just 55,109 weekly puts.

MAO Oct 24

However, this emphasis on calls has been more common in recent weeks. This is per the stock's 10-day call/put volume ratio of 1.99 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which indicates nearly two calls have been purchased for every put on Ford during the past two weeks.


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