Most-Active Options Update: Ford (F), Pfizer (PFE), and Wells Fargo (WFC) Options Activity

ONN’s “Lucky 13″ is our daily listing of 13 equities with the heaviest daily option volume (based on a 20-trading-day rolling average).

Wednesday’s Notable Option Activity–

Ford Motor (F):

After hitting a new 52-week high in intraday trading Wednesday, Ford Motor (F) shares followed the broader market slightly lower, closing off four cents at $8.94. In the options pits, the June 10 put saw some attention, with volume of 4,000 crossing the tape versus open interest of 2,035. The lion’s share of these positions translated into new open interest as of this morning. Given that the put experienced a sharper decline than its delta would indicate, it is likely these were sold to open. Additionally, the one large block that traded during the session (1,708 contracts changing hands at 11:34 AM Eastern) went off at the bid price of $1.84 per contract.

Option traders who sold this put want Ford shares to be trading above the 10 strike at June expiration, or they want the opportunity to acquire Ford shares for an effective price of $8.16 (the strike price minus the premium collected). Maximum profit for a short put is the premium collected; maximum risk is the strike price minus the premium collected.

Pfizer (PFE):

A couple of nuggets of news hit the wires on Pfizer (PFE) yesterday. First, Leerink Swann upped its 12-month valuation range for the drug stock to $19-$21 from $17-$19. Additionally, Pfizer announced it had submitted pediatric data for Lipitor to the European Medicines Agency. The company has also developed a chewable form of the cholesterol-lowering drug. PFE shares rose 25 cents, or 1.4%, yesterday, closing at $18.19. Technically speaking, Pfizer is taking a run at potential resistance around the 18.50 area, site of its mid-October high.

The March 14 put was popular among option traders yesterday, who boosted volume by 6,500 contracts, nearly all of which translated as new open interest this morning. Shortly before noon Eastern Time on Wednesday, a block of 6,390 contracts traded at the ask price of 22 cents per contract. This may have been a cheap way for an investor who owns Pfizer to get some downside protection in the event of a collapse in the stock. If Pfizer is trading above 14 at expiration, the investor loses his 22-cent investment, but there is protection in place from $13.78 downward, representing a 24% decline in the shares.

Wells Fargo (WFC):

With expiration Friday looming tomorrow, it appears that some Wells Fargo investors may have moved front-month call positions to the December series in Wednesday’s trading. During the early afternoon, blocks changed hands on both the November 27 call and the December 28 call, with the former going off at the mid price and the latter trading at the ask. Coincidentally, both options traded for $1.68, so if the trader was in fact selling the front-month to buy the back-month, the trade was a virtual wash due to the change in strike prices.

WFC stock traded 1.7% higher yesterday to $28.86, closing up 49 cents on the day as Moody’s upgraded its rating on the bank. The newly opened December calls are already in-the-money and will remain that way as long as WFC holds above this strike price, although breakeven on this particular trade is $29.68 (the strike price plus the premium paid). Maximum risk for a long call is the premium paid; maximum potential profit is theoretically unlimited above the breakeven price.

The ONN Lucky Thirteen: The 13 stocks with the heaviest option volume during the past 20 days.

1. Citigroup Inc. (C)
2. Bank of America Corp. (BAC)
3. Apple Inc. (AAPL)
4. Microsoft Corp. (MSFT)
5. General Electric Co. (GE)
6. Research in Motion Ltd. (RIMM)
7. JPMorgan Chase & Co. (JPM)
8. Pfizer Inc. (PFE)
9. Amazon.com (AMZN)
10. Ford Motor (F)
11. Intel (INTC)
12. Wells Fargo & Co. (WFC)
13. American International Group (AIG)