If you’re looking for winning options trading information in a sector that’s on the ascent in 2011, then you needn’t look any further than your own garage. That’s because the coming year is expected to be red hot for the auto industry. In fact, the current upbeat mood in the sector can be seen by taking a look at U.S. auto sales in December 2010. That metric rose 11%, its highest monthly rise in 16 months. For the full year, U.S. sales also rose a very strong 11% over its 2009 performance.
That 2010 rise, combined with an improving economy and upbeat consumer sentiment, has caused many auto industry experts to predict very strong sales in 2011. That prediction hasn’t been lost on Wall Street, as we’ve seen some nice recent gains in many auto stocks, including behemoths Ford (NYSE: F), General Motors (NYSE: GM) and Toyota (NYSE: TM).
Fortunately, these three major automakers have plenty of options available for traders who are bullish on the sector. But the big automakers aren’t the only sector stocks with plenty of options action. Smaller firms such as auto-parts supplier Magna International (NYSE: MGA), India-based Tata Motors (NYSE: TTM) and ultra-hip, all-electric carmaker Tesla (NASDAQ: TSLA) also have plenty of ways for the bullish auto-sector options player to profit.
All of these stocks have seen plenty of action in near-term options contracts, and there’s been a lot of trading in out-of-the-money calls that are well above the current share price. For example, Ford has seen heavy open interest in its F Feb 21 Calls, while GM has seen substantive action in the GM Feb 40 Calls. Toyota’s biggest action in out-of-the-money (OTM) calls can be seen in the TM Apr 90 Calls. Magna International’s MGA Mar 60 Calls have seen a lot of action, as have Tata’s TTM Apr 37 Calls and Tesla’s TSLA Feb 30 Calls.
If you’re bullish on auto stocks going forward, then you could buy calls in anticipation of strong earnings from these six, as well as other, stocks in the sector. And, if you’re looking specifically for ways to play events like earnings or the release of the monthly auto industry sales data releases, then look into using short-term, weekly options, which now are available on both Ford and GM.
Disclosure: The author has no current positions in the stocks listed here.
