Here's a screenie of what it looks like. It's not the best shot, because he saw me and is coming at me.. but you can clearly see that you have to aim it yourself. (the target is locked btw)
You can see where he will be at times 1, 2, & 3.. and where the torpdeo will be at times 1, 2, & 3.
Just manuever in, aim it so they will collide at some point in time. Either on 3, or halfway between 2 & 3 etc etc.