Ford stock is rated number three in terms of the IBD Composite Rating within the auto manufacturers industry group behind General Motors (GM) and Tesla (TSLA), according to IBD Stock Checkup. We found it interesting to note the surge in put volume yesterday.
XPerhaps this surge came in response to Tesla's earnings? Ford Motor (F) reports Wednesday after the closing bell. The large volume of puts getting traded could be seen as a bearish sign.
Yesterday, put volume outpaced call volume by a 5-1 ratio despite Ford stock rising by nearly 2%.
In total, the options market saw 561,343 bearish puts change hands vs. 105,922 call options traded.
Ford Stock: What The Bears Think
A put option is a contract between a buyer and seller. The contract gives the buyer the right — but not the obligation — to sell a certain stock at a certain price (strike price), up until a certain date (expiration date).
Buying put options represents a bearish bet on a stock. One put option gives the investor a short exposure to 100 shares.
Interestingly, the put option contract with the highest volume was the April 30 put with a strike price of 11.
Buyers of this put option contract reveal a bearish bet that F stock will end below 11 on April 30.
Trading Ford With A Put Option
This contract traded 56,700 contracts with a low price of 2 cents each and a high price of 7 cents.
Traders who bought this contract at 7 cents per share will need Ford stock to drop below 10.93 at expiration for the trade to be profitable.
It is highly likely that these put options will expire worthless. But let's watch Ford earnings after the close and see where Ford stock closes on expiration day.
Ford stock shows a Composite Rating of 83, an Earnings Per Share Rating of 73 and a Relative Strength Rating of 83.
The stock is currently above the 21-day exponential moving average. F is also leading its 50-day and 200-day moving averages higher. Shares closed Tuesday just 8% below its 52-week high.
Options entail risk. Investors can lose 100% of their investment.
This article is for education purposes only and not a trade recommendation. Remember to always do your own due diligence and consult your financial advisor before making any investment decisions. Gavin McMaster has a Masters in Applied Finance and Investment. He specializes in income trading using options, is very conservative in his style and believes patience in waiting for the best setups is the key to successful trading. Follow him on Twitter at @OptiontradinIQ
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April 29, 2021 at 12:17AM
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Ford Stock Sees Heavy Trading In Put Options; What Is The Winning Trade Now? - Investor's Business Daily
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