Tag Archives: Trade Idea

Ford January Expiration Trade Idea

I’ve recently had flashbacks of the popular press reassuring the popular investor that multinationals were less risky because large percentages of their profits come from overseas. I’m attributing these flashbacks not to an illegal substance but to the weakening Euro.

So I starting thinking again about Ford $F and those percentages.

Disclaimer: Ford is one of those stocks that I personally just like to own. For no other reason than supporting an un-bailed American company. Somehow, I see it as supporting American exports, workers and the general economy. For what that’s worth…

Here are the “operating highlights”  from Ford’s 2010 financial report:

Ford Worldwide Sales

Ford Europe represents 28% of Ford’s total sales (over 55% of Ford’s sales are outside North America).

Now the Operational Results:

Ford Operational ResultsThis 182 number strikes me as odd given that it should represent 28% of the sales volume. Are they suffering on european margins? Or I don’t understand, which is probable.

In any case, now for the revenue:

Ford Revenue 2010

 

24% of Ford’s automotive revenue comes from Europe. Lets just stick with the 24% number for fun and have a look at the Euro since January 2010. Ironically the Euro today is exactly where it was 1 year ago but  I’m sure my flashbacks date back to May.

Euro Dollar 1 Year Chart

Now for that $29.5 billion in revenue from Europe… What will happen to that revenue if the Euro continues it’s downward spiral and Europe’s demand falls of a cliff ?

I’d say 24% of Ford’s revenue is at significant risk.

I’m looking at January puts or January spreads for the possibility that $F retests it’s lows of 9.

Ford 6 Month Chart

 

Missed Trade

Suffering from a lack of inspiration and a little voice in my head which says: “Don’t trade today, don’t trade today, Monday’s aren’t good for you…”

So I’m analyzing the short $ES_F trade I didn’t make but thought about making. Here it is, I’ve circled it. My targets were well placed, and I still ignored it. “Don’t trade today, don’t trade today…”

S&P Futures

The headline effects were limited with nothing on the calendar in the US. Only fear and loathing here in Europe, so the set up was perfect.

Here’s a quote I like from ZH this afternoon. (You can find the full piece here.)

For the moment we appear to be in limbo, where stocks and other risk assets will rally no matter what?  The view seems to be that if European sovereign debt improves, then risk will do well.  There is little fear right now, as the assumption is that if sovereign debt does poorly, Germany will relent and the ECB will officially begin printing money (we say officially, because it is getting harder and harder to believe they are truly “sterilizing” their purchase in a true market neutral fashion). So that seems to be the idea out there, be long risk because if Europe improves, you will win, and if Europe gets worse, it will print, and you will win.  That just doesn’t make sense to us, as we think Germany is further from capitulating on printing than the market seems to have priced in.