Of Coffee and Cars: Recessionary Woes Turned Upside-Down

Ford Motor Company (F) – When there’s a recession afoot, it makes perfect sense to expect a slowdown in consumption, which is a roundabout way of arriving at the expectation of a quarterly loss for Ford Motors today. However, a 5 cent per share profit stunned analysts who’d anticipated a 16 cent loss.

That news delighted investors and prompted a rally in the share price to a four-month high to $8.75. Options on Ford shares glow on our market scanner as one of the most active series in early trading, with 203,000 contracts changing hands and with call volume exceeding put volume early on before some large put orders came in.

The relief was evident in the loss of around one quarter in options implied volatility to read 47% from 62% heading in to the numbers. Heavy call volume today is to be found in the May contract at the 8.0 strike where investors are now paying a 0.47 premium indicating that the rally might just continue in coming sessions. In the June puts at the 6.0 and 7.0 strikes heavy respective volume of 47,000 and 21,000 lots have largely been bought at premiums of 0.08 and 0.17 per contract.

Starbucks Corp. (SBUX) – So the consumer hasn’t stopped buying Ford automobiles, but has stopped buying Starbucks coffee. Hmm. The jury’s out on Howard Schultz’s diagnosis over whether the weakening economy is curtailing demand for its beverages or whether it’s simply losing market share to the likes of McDonalds.

An earnings warning after-hours on Wednesday accurately predicted significant weakness in Starbucks share price today, where the $15.50 price reflects a 13.2% decline. Some 64,000 options contracts is skewed to the put side, indicating a lack of confidence in Mr. Schultz’s assessment. The May contract is active at the 15, 16 and 17 strikes where combined volume of 15,000 lots stacks up against 16,000 existing open interest.

Looks like investors are placing more bearish bets on further declines at your local coffee-house as shares breach a 52-week low.

Rebecca Engmann Darst contributed to this report.