Believe it or not, it’s not time to back up the truck in Ford Motor Company (NYSE:F). But with enough support both off and on the Ford stock price chart and with earnings on the horizon, it’s time to take a bullish test drive in Ford options. Let me explain.
Have you driven a Ford lately? If you have, I’m sure it’s been better than ride F stock holders have been on. A steady, above-market yield of 5.2% has been no match for a 52-week loss of nearly 16% or decline of 38% from Ford’s two-year highs.
Not to pour salt on wounds, but F stock’s dismal price action has occurred alongside a bull market in the broader averages that’s been acting, more or less, like a turbo-powered mustang. But could Ford be on the verge of finally turning the corner?
As I personally wrote back in early March, the road ahead does look strong for Ford stock. For one, Ford is the first auto company that’s set a firm target date of 2021 for rolling out fully autonomous vehicles into the market.
Secondly, Ford’s focus on becoming a more nimble auto company with an eye on increased manufacturing efficiency means when the inevitable cyclical sales decline occurs, Ford will be ready.
The point is, it’s not the end of the road for Ford stock or that matter. That’s not to say Ford’s value-alluring multiples and juicy dividend couldn’t come under pressure. Likewise, don’t hold your breath that Ford will ever have the appeal of Tesla Inc (NASDAQ:TSLA) with traders.
But there does come a time when a stock looks good for a test drive — and Ford exudes that right now.
Ford Stock Weekly Chart
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Prior, a tight consolidation near $12.50 following a “government work” i.e. close enough, February – November 2016 double bottom around $11 in Ford looked like a sufficiently strong platform in our technical opinion for shares to finally rally.
I was clearly wrong on the price action, although the strategy selection in Ford’s options was a good deal stronger.
In the here and now, Ford shares have gone from a double to a triple bottom with price action wedged between the 38% and 50% retracement levels dating back to the 2009 financial crisis bottom.
With a bullish stochastics crossover in oversold territory and candlestick confirmation of the ‘triple / double’ bottom—I do, along with another optimistic caveat, believe F stock is worth a test drive long.
Ford Stock Long Call Strategy
Previously, with shares at $12.49, a June $14 call/($11/$10 put) modified reverse fence strategy is off 21 cents compared to a loss of $1.12 with F now changing hands at $11.37. It’s obviously worked quite well given the circumstances.
Looking at Ford’s options for fresh ideas, I still like this type strategy, in theory at least. Unfortunately, an absence of 50-cent-wide strikes in later-dated maturities, combined with a lack of compelling call premiums to sell, the preferred positioning in Ford stock is a long June $12 call for 17 cents.
Ford Premiums are priced mostly middle of the road right now. In my estimation, and similar to our “government work, good enough
chart, call and put prices are cheaper than not right now.
Bottom line, buying this Ford call with its protective value and reasonable amount of time on the calendar is a sensible strategy worth a test drive for bullish Ford traders expecting an earnings catalyst later this week.
Investment accounts under Christopher Tyler’s management do not currently own positions in any of the securities or their derivatives mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT.
