Best Stock on the Market

Call Spread on F on 11/19/2012

Ford Motor began a manufacturing revolution with mass production assembly lines in the early 20th century, but today it is one of the world's largest automakers. Brands include Ford and Lincoln; Mercury ceased production in 2010. Among its models are the redesigned Ford Mustang, the F-Series pickup, and the fuel-efficient Focus. Finance unit Ford Motor Credit is one of the US's leading auto finance companies. Ford owns a small stake in Mazda but sold Volvo in 2010 to Zhejiang Geely Holding, parent of Geely Automobile, for about $1.3 billion cash and other monetary consideration. It operates about 65 plants worldwide, but gets more than half of its sales from North America. 

Stockwinner is bullish on this name for the following reasons: 

  1. Ford valuaiton is cheap comapred to its rival GE
  2. The stock has a 2% dividend that GE does not 
  3. The trade has enough time to work which makes it a safer trade during this volatile envinroment 

Trade: Buy 1 Feb 11/12 Call spread for less than .30

  • Buy 1 Feb 11 call for .52
  • Sell 1 Feb 12 call for  .22

Breakeven & Profit/Loss analysis 

  • Breakeven at 11.30 by Feb expiration
  • Profit up to .70 between 11.30 to 12 , max profit .70 above 12 
  • Lose up to .30 between 11.30 to 11 , max loss .30 below 11 

The payoff table is presented below: 

Trade

  • Buy 1 February $11.00 Call at $0.52
  • Sell 1 February $12.00 Call at $0.22
  • For a net debit of $0.30

Profit/Loss Analysis

  • Breakeven at $11.30
  • Maximum profit is $70.00 at strike of $12.00
  • Maximum loss is ($30.00) at strike of $11.00

Closing Summary

  • Sold 1 February $11.00 Call at $3.00
  • Bought 1 February $12.00 Call at $1.85

Position closed on 1/11/2013 at price of $1.15 with a 283.33% gain in 53 days.

Updates

1/11/2013 10:59:26 AM

We are closing this position following Ford's upgrade by Goldman Sachs. The brokerage house upgraded the stock to Conviction Buy. We are closing the February $11 call at $3.00 and February $12 call at $1.85. That is a net proceed of $1.15, and compares to the initial investment of $0.30.

If you elect to stay in the trade, please adjust your stop losses.

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