Options Trader Bets Big On Ford
Note: This post was written by Brian Stutland, President of Stutland Equities and a contributor to CNBC's "Options Action."
Yesterday, call options were unusually active in Ford , with the top trades occurring in the January calls. We saw one trader buy the Jan. 11/12.5 call spread for a net debit of $0.18, and the trader did this 1,853 times. This was done with Ford stock trading at 10.10, and is a bullish bet that Ford will be above 11.18 at January expiration.
Would you go to the casino and, with 7 to 1 odds, bet that Ford gets above 12.5 by January expiration? Seems like a reasonable bet to me.
The reason for yesterday's call activity is likely the news the Ford's sales in China have increased 1.7% year over year and 10.5% since August 2012. To capitalize on China's growth (and yes, China is still growing even if the Shanghai Composite does not make it out to feel like it) Ford is planning to launch 15 new vehicles in the country and double its production capacity by 2015. Ford's strong growth in China may have caught investors by surprise due to drumbeat of bearish news out of the region.
Additionally, Morgan Stanley named Ford as a top pick yesterday. Morgan Stanley said the company is leveraged to the U.S. housing recovery and to a European restructuring.
So, the bottom line: This trader is willing to risk a little to gain a lot in the event that the global economy does better than forecasted over the next 100 days.
Brian Stutland is the President of Stutland Equities and a contributor to CNBC's "Options Action."
Watch Options Actionon CNBC Fridays 5:00pm ET, Saturdays at 6a ET and on Sundays at 6a ET
Questions, comments send them to us at: email@example.com