Options Alert: Ford Motor Calls Rolled Up as Rivian IPO Electrifies the Market

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Options traders keep rolling bullish positions in Ford Motor with a key event coming as soon as next week.

This large transaction occurred in the Dearborn, Michigan-based automaker shortly before the closing bell yesterday:

  • 20,000 January 20 calls were bought for $0.73.
  • 20,000 January 27 calls were sold for $0.12.
  • Volume was below open interest in the 20s but not the 27s. That suggests he or she rolled an existing short position to the higher strike.

Calls fix the price where a security can be purchased. Traders can also sell them against underlying stock positions to earn a credit, which is known as a covered-call strategy.

Tuesday’s investor likely owned at least 2 million shares of F and had previously sold the January 20s. Rolling up to the 27s cost $0.61 but increases their potential upside by $7. The fact they were willing to spend money raising the strike suggests they’re bullish on the stock and think it may pass $20 soon.

The covered-call roll resembled a similar transaction on September 27 when an investor rolled the October 14 calls up by $0.50.

Rivian IPO

F rose 0.33 percent to $18.01 yesterday, its highest close in over a decade. The automaker has been rallying on strong quarterly results and plans to increase electric-vehicle (EV) production.

The EV narrative could gain prominence with electric-truck maker Rivian (RIVN) reportedly going public as early as next week. F owns more than 5 percent of RIVN, which is seeking a valuation of $55-60 billion.

Ford Motor (F), daily chart, with 50- and 200-day moving averages.

The IPO could further increase attention on a surging corner of the market. Industry leader Tesla (TSLA) gained on strong third-quarter results and crossed $1 trillion in market capitalization after winning an order from Hertz (HTZZ).

Because many investors won’t be able to access the RIVN IPO, they may view F shares as another way to profit from enthusiasm toward the new company.

F’s current level around $18 has marked an approximate top for the stock since early 2002. That could make some chart watchers see the potential for a rally if it breaks out.

The company may also appeal to value investors because it trades for about 9 times forward earnings and 0.5 time sales. TSLA is valued at 135 times and 27 times, respectively.

Overall option volume in F was almost twice the monthly average yesterday. Calls accounted for 77 percent of the total.

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