Option traders see Ford earnings failure as opportunity

Ford call buyer despite earnings miss

Lower than expected earnings from Ford Motors(NYSE:F) may be enough to shave 3.4% off its share price to $15.75 on the day, but option buyers appear to be taking the dip as opportunity to position for a post Labor Day rebound. Within the first 15 minutes of trading call buying jumped in the 16.0 strike at the September expiration with option players snapping up 5,760 contracts where the premium paid of around 67¢ implies optimism for a rebound of around 5.8% above today’s trading price for shares in Ford.

Option buyers are adding to a stack of more than 34,000 open contracts at the same strike whose value declined due to the earnings miss by around 30% overnight. Ford’s share price jumped above $16 on April 1 for the first time since Jan. 24 and has spent much of the month using the line as a pivot point. After the release of earnings on Friday option implied volatility sank by around 22% to 17% also weighing on premiums across the board.

Chart – Shares in Ford have spent most of April above $16.00  

About the Author
Andrew Wilkinson

Andrew is a seasoned trader and commentator of global financial markets. He worked for several London-based banks trading cash and derivatives before moving to the U.S. to attend graduate school. Andrew re-joins Interactive Brokers following a two-year stretch at a major Wall Street broker-dealer as their Chief Economic Strategist. His coverage of stocks, options, futures, forex and bonds regularly surfaces in global media, and over the last several years Andrew has made many TV appearances on Bloomberg, BBC, CNBC and BNN and Yahoo Finance.

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