Ford Option Bears are Rollin’ Out!

If you’ve been following Ford Motor Company (NYSE: F), you know that it’s performed very well since mid-September. On Friday of last week, the stock also staged a significant breakout when it closed at the highest price in over 10 years!

If you’re bearish, what do you no when your puts have moved further out-of-the-money? Well, you can roll! That’s exactly what option traders have been doing this week and yesterday was no exception. These large-scale rolls reflect further conviction in the bearish outlook of Ford, but also reflect the reality that it may take a little longer.

Option Rolling

Before we get into the specifics on Ford, let’s talk about an option roll. The idea of rolling is that the current position is closed, and a new position is added. The idea of rolling when the price hasn’t behaved is that the new position is moved closer to the stock price, moved further out in time, or both.

Moving the strike price closer to the stock price increases the delta or sensitivity to the price movement in the stock. Adding more time to expiration allows the delta to maintain its integrity for longer. The combination of the two allows more opportunity for the stock to move and will hold up better if the price moves against them. The timing of the roll is what’s important as a signal for the stock. The timing means that they’re expecting the price is nearing its peak.\

Let’s take a look at the significant bearish rolling activity yesterday.

Ford Unusual Option Activity

Here’s the significant put rolling activity in Ford today.

• 50,000 21 JAN 22 $17 puts mostly sold @ $0.26 to $0.33
• 20,000 18 MAR 22 $17 puts mostly BOT @ $0.89 to $0.91
• 20,000 18 MAR 22 $16 puts mostly BOT @ $0.71 to $0.72

The trades above reflect the January $17 puts being sold in order to capture the remaining value. That value is then rolled to buy the put options in the March expiration.

Conclusion

The above activity is a reaffirmation by some of the bearish participants views of Ford in the coming weeks to months. The rolling that occurred yesterday is an attempt to extend the timeframe for a move and is a bearish indicator. Given the recent strength of Ford, you could look for a reversal by breaking the $19 support.

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