Upcoming Trump Inauguration Puts Ford In Spotlight
The U.S. presidential inauguration is little more than a week away. The stock market has famously cheered the incoming administration, with a "Trump rally" that started just after the election results came in and took the major U.S. equity indices to new highs in the subsequent weeks.
Now with the new president officially about to take power, the spotlight is turning to some of the more specific policies that the Trump Administration will likely put into place. Two of the main thrusts of Donald Trump's campaign were protectionist policies to keep jobs in the U.S. and a low regulation environment to foster business growth. Now investors are working out just what that might mean for individual companies, who will have operate complicated international businesses under the new regime.
Ford ($F) has become the poster company for that discussion, a fact which has led to multi-month highs in implied volatility.
Implied Volatility for F has been edging higher over the past several weeks. It has climbed from a level just above 20 in late November to 28.7 at the close Tuesday. The current levels are the highest IV figures since June.
This advance comes as politics has become the main topic of discussion around the major auto makers, even as the industry shows off its new models at one of its key annual marketing events.
President-elect Donald Trump has called out the major auto makers by name as part of his campaign goal to keep jobs in the U.S. He has threatened U.S. manufacturers with a "border tax" if they offshore workers.
The political spotlight is already having an impact on Ford's plans. The company announced last week that it is holding off on plans to build a new facility in Mexico. Instead, the company will be investing $700 million in facilities in the U.S.
Ford explicitly denied that the decision had anything to do with the incoming president. Instead, the company cited lower demand for smaller vehicles (the company makes its small-sized Ford Focus in Mexico).
However, Ford's top executive did admit to Fortune that there has been some influence from Trump's approaching presidency. Rather than getting scared out of a possible expansion in Mexico, CEO Mark Fields said he sees a brighter business environment in U.S. on the way, thanks to what he perceives will likely be a pro-business administration.
"As you can imagine, we look at a lot of different factors and one is that we feel it's going to be a positive business environment under President-elect Trump, particularly for manufacturing," Fields said, according to Fortune.
The run up to the inauguration coincides with the Detroit Auto Show, which always serves to bring attention to the industry. The event, which began on January 8 and lasts through January 22, is a centerpiece of the auto industry's annual marketing push. It allows companies to show off new models and new technology, as well as preview some plans for the future.
The ATM Straddle premium for Ford for the January 20 expiration (the day of the inauguration) is $0.44, or 3.5%. Looking further out, the February 17 expiration, which is after Ford's next quarterly earnings report, has a premium of $0.88, or 7%.
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