Why Ford Stock Could Be an Interesting Play for Options Bulls

The stock is overdue for a round of upgrades, too

Mar 17, 2021 at 3:19 PM
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American auto staple Ford Motor Company (NYSE:F) has been making moves of late. The equity just closed above the round $50 billion market-cap level last Thursday, which coincides with the $12.79 area. The equity has topped a few key levels that could signal even more upside, including a trendline connecting lower highs from 2010 to 2014, which it broke north of in January, as well as long-time resistance 80-month moving average, which it toppled during February. This long-term trendline acted as support in 2011 and 2012, and last month's pop could signify a bullish crossover similar to one Ford stock saw in 2010.

Not only does Ford's technical setup look promising, news just broke that the car manufacturer is considering re-tooling its plants to accommodate electric cars. It seems the company is in the position to sell to early adopters of the electric vehicle as well as traditionalists, as two of its new SUVs -- the Mustang Mach-E and the Bronco -- have a waitlist.

WTRepost Ford

The expiration of about 28,000 13-strike calls last Friday eliminates potential resistance. While the monthly March contract is quite call-heavy, the big 15-strike calls could act as a magnet on continued strength. The monthly April contract looks more balance as far as put and call open interest. With the put contracts out of the money (OOTM), a potential unwinding of these OOTM puts after the monthlies expire next week could help F rise even higher.
Ford stock is overdue for a round of analyst upgrades, too. Of the 12 in coverage, just five brokerages call it a "strong buy."

Considering this, now looks like an ideal time to pick up Ford calls. The equity's Schaeffer's Volatility Index (SVI) of 48% stands higher than just 9% of readings from the past 12 months. Plus, our recommended call option has a leverage ratio of 4.4 and will double in a 22.2% pop in the underlying equity.

Subscribers to Schaeffer's Weekend Trader options recommendation service received this F commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.


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