A Bullish Pre-Earnin​gs Option Play in Ford

Ford

saw it's shares flirt with their 52-week low of $9.05 yesterday and, with the stock now trading 31% off its 52-week high, it may be a good time to look at a relatively low cost bullish option play ahead of tomorrow morning's second-quarter earnings release. A trader could go out 2 months to the September expiry and purchase the September 9 call at $0.50, while simultaneously selling the September 8 put at $0.11. With a net debit of $0.39 or $390/combo, traders could begin to see profits when the shares trade above $9.40, or 2.5% higher than yesterday's close. With the "naked" put sale, there is the possibility of being "put" shares at $8.00 if the stock traded below the strike. The stock has not traded at that price level since November 2009 and, when it did, it clawed its way back above $10.00 within a couple of months. So $8.00 looks to be a decent entry point. The stock's recent slide is due in part to a recent recall of 11,000 2013 model Ford Escapes and a down turn in auto sales in Europe and South America. Analysys' estimates call for EPS of $0.28 on revenues of $32.17 billion. With the shares trading at this relatively low level, any upside surprise in tomorrow's release could easily push the shares back to the $10.00-$11.00 range in the coming weeks.