Unveiling Options Revealed
Considered a staple in many investor’s stock options watchlist, Ford Motor Co. (Symbol: F) often stands out. This week, a unique put contract and an intriguing call contract from the December 2025 expiration for F have surfaced. Let’s delve deeper into the details of these options.
Peering into Put Contracts
The YieldBoost algorithm has identified an alluring put contract at the $8 strike, sporting a bid of 68 cents at the time of writing. Garnering this bid as the premium translates to an 8.5% return against the $8 commitment or a 4.4% annualized rate of return. Nevertheless, it’s important to note that selling a put does not provide an investor with access to F’s upside potential as owning shares would. The put seller only ends up owning shares if the contract is exercised. Hence, the potential upside for the put seller hinges on Ford Motor Co.’s shares experiencing a 33.1% decline and the contract being exercised.
Shedding Light on Call Contracts
Shifting to the other end of the option chain, we spotlight an intriguing call contract for the December 2025 expiration, catering to Ford Motor Co. (Symbol: F) shareholders aiming to elevate their income beyond the stock’s 5% annualized dividend yield. Selling the covered call at the $15 strike and securing the premium based on the $1.05 bid annualizes to an additional 4.5% rate of return against the current stock price. This constitutes a 9.5% annualized rate in the scenario where the stock is not called away. Any upside above $15 would be lost if the stock rises to that level and is called away. However, F shares would need to climb 25.4% from current levels for that scenario to materialize, implying that if the stock is called, the shareholder will have earned a 34.2% return from this trading level, in addition to any dividends collected before the stock was called.
Analyzing the Numbers
The chart below depicts the trailing twelve-month trading history for Ford Motor Co., highlighting the placement of the $8 strike in green relative to that history, and showcasing the $15 strike in red. This, coupled with the stock’s historical volatility, can serve as a useful guide in combination with fundamental analysis to assess whether selling the December 2025 put or call options pinpointed in this article yields a rate of return that represents a favorable reward for the risks. With a trailing twelve-month volatility of 36%, calculated considering the last 250 trading day F historical stock prices using closing values, as well as today’s price of $11.96, investors can weigh their options judiciously.
Insights into Options Trading
Observing the put and call volume among S&P 500 components in mid-afternoon trading on Monday reveals a put:call ratio of 0.71, surpassing the long-term median put:call ratio of 0.65, thereby indicating an increased put volume. This implies a higher number of put buyers compared to the expected amount in options trading for the day. This trend raises compelling questions about the current sentiment and investor behavior in the options market for Ford Motor Co.
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