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Trader bets on more pain ahead for auto giant

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Auto stocks are taking a beating, and options traders are betting on more pain ahead for one in particular: Ford.

Big auto names like Ford and GM are both down 6 percent in the last week, as new data point to growing trouble for the space. The compounding pain stems from a drop in used car prices, growing auto loan defaults and bearish Wall Street sentiment.

Morgan Stanley on Monday reiterated its underweight rating on Ford, rattling investors on the notion that we've reached the peak for autos.

Mike Khouw of Optimize Advisors noted that the sentiment has trickled over to the options market. "Ford saw 2.5 times its average daily put volume [Monday]," he told CNBC's "Fast Money" on Monday.

In one particularly bearish trade, there was a big buyer of 12,000 of the June 12-strike puts for 55 cents. This means that the trader is betting that Ford shares will fall below $11.45 per share by June expiration. "That is testing that 2016 low," Khouw explained.

"The auto sector, not just due to the credit crisis, is a high cyclical industry that's sensitive to oil prices and obviously product cycle issues," he added.

Ford was down nearly 4 percent in midafternoon trading Tuesday.

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