A Bullish Options Trade on Ford

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July 5 (Bloomberg) -- Option Pit Mentoring COO Mark Sebastian discusses his options play for Ford with Dominic Chu on Bloomberg Television's "Lunch Money." (Source: Bloomberg)

Talk a little bit about what is happening with the auto trade.

You are in detroit.

You are in the heart of the american auto business.

What has got you so bullish on what is happening with detroit.

It is so much fun to be here.

I got married to my wife five years ago at a time when the auto industry was really bad.

I am here over the fourth of july where the factories are normally shut down.

The autoworkers are working and they cannot keep them on the shelves.

Ford and gm have just been unbelievable.

There is plenty more upside in both of those stocks.

As we talk ford and gm, you are looking at sort in general.

They are near five-year highs in terms of sales and everything else.

What is it about 40 that has you so bullish and how you play it in the options -- ford that has you so bullish and how you play in the options market?

They are playing it from both sides.

The stock is sitting at a 52- week high.

It is not at its all-time high.

It has plenty of room to go higher.

They have earnings coming up and i think they will do really well.

I want to play something ahead of earnings.

How do you do that with options to?

It sounds like call options, but there is a different structure -- how do you do that with options?

There is a different structure.

I will buy the call behind it that expires the following friday before earnings in the hopes that the board -- ford slowly rallies to the $17 level.

I can hold that july 20 call basically free.

If it sits there, that spread will expand and i can flip it for 15 cents, which would be a really nice win in my book.

Tell us about the risk reward profile for this trade.

I am pain 7 cents for the trade.

The most i can lose is $7. i can double my money pretty easily.

Where i get beat if -- is if ford quickly drops or quickly these higher.

Options on your ford options.

This text has been automatically generated. It may not be 100% accurate.


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