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Today, we’re opening a new bearish trade on Ford (NYSE:F). Auto dealers and manufacturers are in a tough spot. The economy is chugging along OK, but the demand we saw over 2015-2016 has dropped off a cliff.
Unfortunately, production is more difficult to slow — especially now that such actions risk condemnation from the government in Washington D.C. Inventory to sales ratios and turnover times are at highs we haven’t seen for eight years.
We think these are some of the most important reasons that F hasn’t participated in the rally with the rest of the market.
Despite the long-term consolidation, we like a bearish position on F as the odds for a breakdown have increased significantly. Used car dealers are often a leading indicator for F, and they have already been selling off for a few weeks.
‘Buy to open’ the F April 13 Puts (F170421P00013000) for a maximum price of $0.67.
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