By Mike Yamamoto of OptionMonster
NEW YORK -- Ford (F) popped on strong China sales at the end of last week, and bullish option traders are rolling with the move.
OptionMonster's tracking system detected the purchase of 45,000 September 18 calls for 26 cents and the sale of an equal number of September 17 calls for 62 cents on Friday. Volume was below open interest at the lower strike, so it appears that a winning position was closed and rolled higher.
The adjustment allows the trader to collect 36 cents while staying in the trade for more potential gains, though the new long calls will lose value if the stock remains below $18 through mid-September. They expire well after the auto maker's new CEO takes charge on July 1.
These calls lock in the price where shares can be purchased, allowing investors to acquire a stock with limited risk or to ride a rally without ever owning it. Traders can profit by selling contracts before expiration or swap them from one strike to another, which is what happened Friday.
Ford ended the session up 2.4% to $17.08 after reporting that Chinese sales rose by almost one-third. The move follows bullish option activity in rivals General Motors (GM) and Toyota (TM) earlier in the week.
Overall option volume in Ford was almost seven times greater than its daily average for the last month, with calls accounting for a bullish 84% of the total.
Yamamoto has no positions in F.