Call Options Or Put Options On Ford (F)?

| April 2, 2014 | 0 Comments

F OptionsFord (F) is making waves after jumping 5% in yesterday’s trade.  The automaker giant has been fairly quiet in regard to trading for the past couple months.

F shares are currently trading at $16.32.  The stock’s up 38% from the 52-week low of $11.83 and is just 8% below the 52-week high of $17.78.

Is this an opportunity to buy call options on F after the company posted strong vehicle sales in March?  Or should you buy put options on F because competition in the space is only going to get more intense?

The bulls make a convincing argument…

F surprised the markets this week by announcing strong US vehicle sales for March.  The number rose to 244,167 from 236,160 a year ago.  Sales were only expected to be around 239,000, so this was a nice surprise from the automaker.

The company saw strong sales in its popular Fusion model, as well as in the F-series truck and the Lincoln MKZ.  The boost in a diversity of brands is a good sign that consumer auto purchases are picking up.

Moreover, it shows consumers are back to their spending ways after staying indoors over the harsh winter.  As the weather thaws, so it seems consumer spending will increase.  That’s great news for a US-centric company like F.

But the bears have a compelling case as well… 

F may have posted better than expected vehicle sales, but much of it has to do with the poor weather over the winter.  The number could just be equalizing after consumers stayed indoors during the harsh weather.

Moreover, competition in the automotive industry is only getting tougher.  Companies like Tesla (TSLA) are rewriting the rules of making and selling cars, and traditional powerhouses like F could be in trouble.

As alternative fuels become more and more popular, F and other old-time automobile makers may have to shift their business models in order to keep up.  There is almost no margin for error in the ultra-competitive industry.

So is F’s strong March sales number a reason to be bullish on the stock, or is the intense competition in the industry a reason to be bearish?

If you think the bulls are right, take a look at buying the F May $16 calls for around $0.60.

If you think the bears are right, take a look at buying the F May $16 puts for around $0.40.

Yours in Profit,

Gordon Lewis

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Category: Call Or Put Options?

About the Author ()

Gordon Lewis is the Chief Investment Strategist and editor for the popular daily newsletter – Options Trading Research. He’s also editor of our dynamic theme-based options trading service, Advanced Options Adviser, and one of the key analysts behind the highly successful Options Trading Wire.

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