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Courtesy of FordCall option volume on individual stocks has surged in January to record levels amid growing investor enthusiasm for stocks. Former laggard Ford Motor was the focus of options activity on Thursday as its stock added to recent gains.
January call volume has averaged 20.1 million contracts a day, up from 16.8 million contracts in December and fewer than 10 million in January 2020. Calls give investors the right to buy a stock at a given price and amount to a bullish bet.
Apple (ticker: AAPL), Tesla (TSLA), NIO (NI), Palantir Technologies (PLTR), and Alibaba Group Holding (BABA) have been the most active calls so far this month, according to Cboe Global Markets.
Thursday’s spotlight on Ford (F) came as its shares rose 80 cents, or 7.3%, to $11.66 on enthusiasm over its electric vehicles, including its flagship F-150 pickup. It also received a favorable mention by CNBC’s Jim Cramer. The stock hit a new 52-week high of $12.15 earlier in the session.
Ford is now up about 33% this year, in line with the gain in rival General Motors (GM), which is also being buoyed by EV hopes as well as its strength in autonomous vehicles. Ford and GM are among the top-performing stocks in the S&P 500 in 2021—something that hasn’t happened for a long time. Barron’s wrote favorably on Ford’s prospects in late 2020.
Option volume in Ford totaled about 1.5 million contracts around midday Thursday, against a daily average of 262,000, according to Henry Schwartz, senior director and head of market intelligence at Cboe Global Markets.
He noted that the ratio of calls to puts in Ford stock is running at 7 to 1 and that 600,000 options traded in the first hour of trading. A call contract gives the holder the right to buy 100 shares of Ford stock, while a put contract gives the holder to right to sell 100 share.
Call option volume has risen sharply in January, but put volume growth has been more restrained and remains a fraction of call activity. Puts on individual stocks are averaging about 7.9 million contracts a day against 6.6 million in December.
Schwartz says that Thursday’s option activity is a daily record for Ford already and could hit 2 million contracts (equivalent to 200 million shares of stock) by the end of the day.
Implied volatility in Ford calls has risen sharply with the stock. Ford calls with a $12 strike price and a February expiration have an implied volatility of close to 65%, up from 50% earlier this week. The higher implied volatility means Ford calls have gotten more expensive.
Write to Andrew Bary at andrew.bary@barrons.com
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January 22, 2021 at 02:19AM
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Call Stock Option Activity Is Booming. Why Ford Is a Focus. - Barron's
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