Shares of automaker
Ford Motors (F) have been in a decline since hitting a multi-year high back in January. One trader is betting the downtrend will reverse in the next few trading sessions.
That’s based on the April 8th $16 calls. With 16 days until expiration, 26,528 contracts traded hands compared to an open interest of 721, for a 37-fold rise in volume. The buyer of the calls paid $0.97 to make the trade.
Ford shares recently traded for about $16.50, making these options about $0.50 in-the-money. With a 52-week high just under $26, the option wouldn’t need much of a boost in shares to trend higher.
Even with the recent pullback, shares are still up 31 percent over the past year. Investors like what they’re hearing about the company’s plans to expand electric vehicle offerings, even as the company isn’t profitable at the moment.
Action to take: With a number of leading brands in the automotive space, the pullback could be a solid entry point for shares. The stock trades at less than 8 times forward earnings, and at current prices yields just under 2.4 percent.
For traders, the April calls are an attractive play for a quick rebound in shares. However, with so little time left to play out, traders may want a strike date later in the year to take advantage of a bigger swing. With the April calls, traders could likely nab a quick mid-double-digit percent winner.
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.