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Trader's Radar: Have You Driven a Long Call Lately?

By Chris Tyler, Optionetics.com | Tue March 20, 2012 7:09AM PT


Shares of Ford Motor Co (F) were up about 1.0% Monday or by a less-impressive sounding $0.12 to finish at $12.63. Nonetheless, a somewhat heavy 82,000 contracts changed hands compared to an average tally of 62,000. Of that number and a bit more interesting, calls powered past put activity by a margin in excess of 5-to-1. Concentrated activity of 16,000, 10,600 and 12,800 could be found in the April and May 13 call and June 14 call.

“Have you driven a bronco lately?” In truth, much higher open interest in all three strikes versus the fore-mentioned volume, fairly flat and cheap-looking implieds and a lack of attention to actual print sleuthing, though not for a lack of trying, means we can’t say with any authority what the call activity was doing for certain. Rolling, time spreads and even call selling with or maybe without stock could be behind some sizable portion of the trading.  

Despite the uncertainty of what the other trader may be buckling up for in the weeks ahead and with no company specific news to tie the option activity to, Ford’s technical picture does appear to be shaping up nicely for a potential bronco busting upside breakout. Looking at the daily view shown in Figure 1 below, F shares have been quietly, in a non-mustang like manner I might add, forming a flat base for the past eight weeks.


Figure 1: Ford (F) Daily Chart

Of bullish notice is the time completion of eight weeks and one of Fibonacci’s natural sequence numbers. This amounts to F shares as having sufficient technical rest to neutralize the prior up-leg from a Wave 5 bottom. Also acting as confirmation is F finding support the past couple days off its 50SMA and establishing a Golden Cross i.e. 50 / 200SMA crossover during this period.

For the bears or more wary bulls, we can’t fully ignore the rearview mirror and where shares have motored from back in early October. Further, ProfitSource’s EW does see a bearish weekly W5 developing with a possible mid TAPP objective of around $6.50 come June. Also, our bullish lean on the flat base has nonetheless developed around Ford’s prior highs set back in October. Thus, while we can’t say this bronco has an unequivocal bullish footing, Monday’s favored calls look like go-to contracts to consider, if F stock can kick itself out of neutral and begin to motor towards $13.    


Chris Tyler
Senior Options Writer, former Market Maker & fulltime Option Hedge Hog Advocate
Optionetics.com ~ Your Options Education Site
Visit Chris Tyler’s Forum
 
The information offered here is based upon Christopher Tyler’s observations and strictly intended for educational purposes only, the use of which is the responsibility of the individual. 

 


Recent articles by Chris Tyler, Optionetics.com


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September 20, 2012  -  Wall Street's Thursday Lunch Options
September 19, 2012  -  The Expected Move: Bed Bath & Beyond Earnings
September 19, 2012  -  Wall Street's Wednesday Lunch Options


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