Traditionally, the second largest US automaker – Ford – had been seen as a better bet for options traders than its largest US rival – General Motors. But today the tide has changed.
According to three-month data compiled by Bloomberg, Ford’s implied volatility, which stems from the demand for contracts that protect against losses in stocks, has seen the indicator growing to 1.003 times GM contracts and just two weeks it reached the highest value ever. Max Breier at BMO Capital Markets Corp. believes the situation was triggered by the announcement made in September that the company would not be able to fulfill its profit goals for 2014. Now, Ford hedges have been pricier than GM’s for 18 straight days, the longest streak since 2011.
The data shows that since the Detroit-based GM’s shares restarted trading on the New York Stock exchange (after exiting bankruptcy) back in 2010, around 80% of the time Ford’s stock traded the implied volatility lower than General Motors. Now, the situation has been reversed, even as the latter had a leadership change and suffered a record wave of recalls, starting with the troubled 2.6 million autos campaign for defective ignition switches. Ford also fell the most in three years when it announced in September the financial expectations for the year.