Large Option Trader Makes Aggressive Bearish Play On Ford

Ford Motor Company F shares are up 32.4% year to date, but a series of unusually large options trades Tuesday morning suggests at least one trader thinks the rally may have stalled.

The Trades

On Tuesday at around 9:19 a.m., Benzinga Pro subscribers were alerted to a sale of 1,000 Ford call options at an $9.50 strike price that expire July 19. The calls were sold at the bid price of 65.1 cents and represent a $65,100 bearish bet that Ford shares will be trading at or below $10.15 roughly two weeks from now.

Within one minute, likely the same trader sold an additional 1,000 of the same call options at the same bid price of 65.1 cents. This second trade represented another $65,100 bearish bet on Ford.

At 9:20 a.m., a trader purchased 1,000 of those same Ford call options expiring on July 19, this time at the ask price of 66.1 cents. This time, the bullish bet was worth $66,100.

Over the next two minutes, there were two more 1,000-contract sales of Ford call options expiring on July 19, this time at the bid price of 67.1 cents. This time, the bearish bet was worth $134,200.

All together, the trader(s) sold a net of $198,300 worth of Ford call options within a five-minute stretch.

Options Insight

Even traders who focus exclusively on the stock market watch the options market closely to gain insight into what option traders may be thinking.

Due to the relative complexity of the options market, options traders are generally seen as more sophisticated than the typical stock trader. Large options traders are often institutions or wealthy individuals that may have a unique perspective and/or advance information on a given stock.

Recall A Concern?

On Tuesday morning, Ford issued a safety recall of 58,000 Focus models manufactured between 2012 and 2017 due to malfunctions that could lead to a deformed fuel tank.

Ford was careful to say that no injuries have been reported as a result of these errors, but the bearish trader may be concerned about additional fallout from the recall down the road.

At the same time, Ford also is expected to report second-quarter numbers the week after the call options expire. The trader may expect some selling pressure for the stock heading into earnings as traders cash out their large 2019 gains.

Unfortunately, there’s no way to be 100% certain whether the buys are a standalone position or a hedge against a larger stock holding.

Given the combined value of Wednesday’s trades is under $400,000 in size, they would be relatively small to be institutional hedges. However, the trades were all placed within a five-minute stretch and were broken into 1,000-contract lots, a common strategy for institutions trying to keep their moves under the radar.

Ford's stock traded around $10.16 per share at time of publication.

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