Have you driven a Ford Motor Company (NYSE:F) vehicle lately? Relating that question to F stock, now could be a good time to buckle up with a fully protected collar strategy as conditions off and on the price chart drive forward.
Let me explain.
In an almost perverse turn for the better, long-battered shareholders of F stock are in position to see a positive return on investment that lasts for more than a couple weeks and isn’t wholly reliant upon Ford’s quarterly dividend of 4.86%.
What’s driving the bullish price action in Ford shares right as competitors like General Motors Company (NYSE:GM) and Tesla Inc (NASDAQ:TSLA) have reversed on those investors with less-friendly technical U-turns?
It’s not possible to know 100% for sure what mix of factors is driving F stock investors. Nevertheless, one could look at the seemingly laughable disparity in shareholder performance over just the past year between the three auto manufacturers and appreciate the narrowing of that spread.
No doubt the market’s forward-looking mechanism is also betting on the Trump administration’s potential and very favorable tax plan, which would benefit Ford. Of course, that would help GM and Tesla as well.
But investors could also be drawn to F stock’s growth at a reasonable rate (GARP). Bottom-line, top-line and even the squiggly line on Ford’s price chart, following last week’s solid corporate Q3 confessional, increased opportunities within the electric and autonomous auto markets and growth for F stock too.
F Stock Weekly Chart
Without getting overly technical and realizing that’s a fool’s game anyways, F stock appears to have finally turned the corner and is now positioned for a bullish trend to emerge.
Following a defiantly stubborn double bottom test of Ford’s flash crash low, shares have broken a long-standing downtrend and are consolidating in a fairly tight congestion pattern above the prior resistance line.
The interpretation is a bullish resolution, i.e., a technical breakout, will ultimately lead to higher prices. My bet is that should also lead to both relative and absolute out-performance for F stock and its shareholders through the remainder of 2017 and driving well into 2018 and beyond.
F Stock Bullish Collar Strategy
Given our bullish view, F stock is poised for a much better performance going forward, but always mindful of safety, a collar strategy is a favored way to park a Ford investment in the portfolio.
One preferred combination, though there aren’t many options to choose from, is the Dec $12 put / $13 call collar priced for $12.44 versus purchasing F stock outright for $12.35.
If Ford shares rally, the trader is initially capping profits at a fairly healthy 4.5%. But this isn’t simply a buy and park strategy. If there is technical follow-through, this shareholder can adjust and roll the collar up and out in order to capture additional profits with less risk down the road.
Disclosure: Investment accounts under Christopher Tyler’s management currently own positions in Ford (F) stock and its derivatives. 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 and StockTwits and feel free to click here to learn more about how to design better positions using options!
