Visteon Corp: Improving U.S Auto Market Says a VC Calls are Smart

Before going into today’s piece, I think it is expedient to inform you that I have sold the remaining 20% of my AVGO Oct 2014 70 calls to make an extra 20% this week. If you are still holding October AVGO calls, I think you should sell to close now before sideways trading actions causes you to lose a part of your profits. In addition, the contract is only about 35 days to expiration and you wouldn’t want to be caught dead holding expired contracts.

We round up our options trading activities for this week today as we explore the opportunities in the options of Visteon Corp (NYSE:VC). Visteon Corp with its market capitalization of $4.55B is a global supplier of climate, electronics and interiors systems, modules and components to automotive original equipment manufacturers (OEM), including BMW, Chrysler, Daimler, Ford, General Motors, Honda, Hyundai, Kia, Nissan, PSA Peugeot Citroen, Renault, Toyota and Volkswagen. The Company operates in three segments: Climate, Electronics and Interiors.

Why I am Drawn to VC Options

  • Improving U.S Auto-Market

I became interested in exploring VC options yesterday after news broke that August Auto Sales was positive to signal improving market conditions in the U.S auto industry. The Wall Street Journal reports that Fiat Chrysler Automobiles led the rally with 20% increase from the same period last year. Sales at Volkswagen were up 27%, sales at BMW AG was up 11%, and sales at Daimler AG was up 9%.

Visteon Corp sells its products to automotive OEMs who in turn use the products in their vehicles. An improving U.S automobile market shows that demand for automobiles in the U.S is increasing. Increasing demand for automobiles invariably means that there will be increased demand for Visteon products across its three reporting segments.

  • Impressive Stock Performance

VC Stockchart

A glance at Visteon Corp’s stock performance within the last one year as shown in the chart above is enough reason to buy VC calls. The chart plots Visteon’s share price against the S&P 500 over the last one year. Shares of Visteon have gained an impressive 42.82% compared to gains of 21.28% recorded in the S&P 500.

Shares of Visteon currently trade at a 43.91% premium to the 52-week low of $72.17 to confirm the 42.82% gains recorded in the last one year. As at 2:42PM EDT today, shares of Visteon are up 0.83% to 103.86 after the company had made a new 52-week high of $104.01.

How to Trade VC Options

It might interest you to know that Visteon has an RSI Index of 73.22, which suggests that we can still catch a wave to profitability on the strength of the current bullish sentiment. I am also encouraged by the fact that Visteon has a Number 1 “Strong Buy” Zacks rank.

Another interesting point that makes the bullish case for Visteon Corp is the raising of FY 2014 guidance after the release of great second quarter (Q2 2014) results with a 133% earnings surprise. Visteon projects 2014 sales at $7.6B and earnings per share in the range of $2.98 to $3.92 per share.

I strongly believe that the bullish run on Visteon will continue for at least the next two months when the company releases it third quarter results on November 6. I recommend buying the VC Dec 2014 105.000 call (VC141220C00105000) at an asking price of $3.80.

— Daily Option Alerts

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