How Option Traders Are Playing Ford Following $2.7B Rivian EV Truck Investment

Ford Motor Company F shares spiked 6.6% Thursday and are now up 18.6% in the past week following news that Ford electric truck startup Rivian raised more than $2.7 billion at a $28 billion valuation.

The Ford news also triggers a flurry of unusually large bullish option trades on Thursday as investors continue to try to position for the next generation of the auto industry.

The Ford Trades: On Thursday, Benzinga Pro subscribers received dozens of option alerts related to unusually large Ford trades. These four stood out as some of the largest:

• At 9:42 a.m., a trader bought 1,000 Ford call options with a $5.50 strike price expiring in January 2022 near the ask price at $6.05. The trade represented a $605,000 bullish bet.
• At 10:28 a.m., a trader bought 5,192 Ford call options with an $11 strike price expiring on Feb. 19 near the ask price at $1.12. The trade represented a $581,504 bullish bet.
• At 10:29 a.m., a trader bought 5,038 Ford call options with an $11 strike price expiring on Feb. 19 near the ask price at $1.136. The trade represented a $572,316 bullish bet.
• At 10:32 p.m., a trader bought 5,712 Ford call options with an $11 strike price expiring on Feb 19 above the ask price at $1.182. The trade represented a $675,158 bullish bet.

Related Link: David Einhorn — Notorious Tesla Short Seller — Just Had His Best Quarter Ever

Why It’s Important For Ford Investors: Even traders who stick exclusively to stocks often monitor option market activity closely for unusually large trades. Given the relative complexity of the options market, large options traders are typically considered to be more sophisticated than the average stock trader.

Many of these large options traders are wealthy individuals or institutions who may have unique information or theses related to the underlying stock.

Unfortunately, stock traders often use the options market to hedge against their larger stock positions, and there’s no surefire way to determine if an options trade is a standalone position or a hedge.

In this case, given the relatively large size of the largest trade on Thursday, they could certainly be an institutional hedge.

Ford An EV Play? EV stocks have been some of the hottest investments in the market in the past couple of years, with names like Tesla Inc TSLA and Nio Inc - ADR NIO up more than 1,000% in the past 18 months. Ford has been mostly left out of that rally, but investor sentiment may be starting to change now that it’s becoming clear that Rivian is positioned to be a very valuable investment for Ford.

Ford has an undisclosed stake in Rivian after investing $500 million in the company at much lower valuation back in April 2019.

Benzinga’s Take: Ford has said it's spending more than $11.5 billion in EVs through 2022, yet the stock is down 2.9% overall in the past three years while the share price of minuscule EV companies have soared. Thursday’s call buyers may have sensed Ford investor sentiment is finally starting to turn, and Ford has a long way to go to close the valuation gap with other EV stocks.