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Options traders keep rolling bullish positions in Ford Motor with a key event coming as soon as next week.
This large transaction occurred in the Dearborn, Michigan-based automaker shortly before the closing bell yesterday:
Calls fix the price where a security can be purchased. Traders can also sell them against underlying stock positions to earn a credit, which is known as a covered-call strategy.
Tuesday’s investor likely owned at least 2 million shares of F and had previously sold the January 20s. Rolling up to the 27s cost $0.61 but increases their potential upside by $7. The fact they were willing to spend money raising the strike suggests they’re bullish on the stock and think it may pass $20 soon.
The covered-call roll resembled a similar transaction on September 27 when an investor rolled the October 14 calls up by $0.50.
F rose 0.33 percent to $18.01 yesterday, its highest close in over a decade. The automaker has been rallying on strong quarterly results and plans to increase electric-vehicle (EV) production.
The EV narrative could gain prominence with electric-truck maker Rivian (RIVN) reportedly going public as early as next week. F owns more than 5 percent of RIVN, which is seeking a valuation of $55-60 billion.
The IPO could further increase attention on a surging corner of the market. Industry leader Tesla (TSLA) gained on strong third-quarter results and crossed $1 trillion in market capitalization after winning an order from Hertz (HTZZ).
Because many investors won’t be able to access the RIVN IPO, they may view F shares as another way to profit from enthusiasm toward the new company.
F’s current level around $18 has marked an approximate top for the stock since early 2002. That could make some chart watchers see the potential for a rally if it breaks out.
The company may also appeal to value investors because it trades for about 9 times forward earnings and 0.5 time sales. TSLA is valued at 135 times and 27 times, respectively.
Overall option volume in F was almost twice the monthly average yesterday. Calls accounted for 77 percent of the total.
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