Car manufacturer Ford Motor Company (F) has seen shares lose over a quarter of their value in the past year. One trader is betting that the stock will see a further slide in the months ahead.
That’s based on the June $12 puts. With 106 days until expiration, 20,868 contracts traded compared to a prior open interest of 269, for a 78-fold rise in volume on the trade. The buyer of the puts paid $0.98.
Ford shares recently traded for about $12, making this an at-the-money trade. The $12 strike price is also well above the stock’s 52-week low of $10.61, hit late last year before a strong rebound.
The automaker’s earnings collapsed 90 percent last year, even as revenues rose by 17 percent.
Rising interest rates and a slowing economy are likely to weigh heavily on a cyclical company such as the automotive industry, more than offsetting the excitement the company has seen in recent years over its electric vehicle offerings.
Action to take: Shares likely have more downside ahead. Investors interested in shares for the long haul may want to wait until the stock gets closer to $10 per share.
For traders, the June puts are well positioned for further downside in shares, with a low cost in the event that the stock jumps higher. The puts can likely deliver mid-double-digit returns.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.