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Most Active Options Update: General Motors Company (GM)

General Motors Company option traders eye a quick rebound

by 3/31/2014 12:55 PM
Stocks quoted in this article:

The 20 stocks listed in the table below have attracted the highest total options volume during the past 10 trading days. Names highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. One name of notable interest this afternoon is General Motors Company (NYSE:GM).

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General Motors Company is sitting out the day's broad-market rally, following reports that it has widened its massive recall. Additionally, a congressional investigation said both GM and federal regulators failed to address the vehicle defects in a timely manner. CEO Mary Barra will testify before the House and Senate this week.

In GM's options pits, meanwhile, speculators are disregarding these fundamental woes, and calls are outpacing puts by a roughly 1.5-to-1 margin. The May 37 call has received notable attention, as traders bet on a quick bounce for the troubled automaker. More than 3,300 contracts have changed hands thus far -- 97% at the ask price. Implied volatility is up 1.2 percentage points, and volume outstrips open interest, hinting at buy-to-open activity.

Considering GM hasn't traded north of $37 since reports of the federal investigation hit the newswires, delta for the call is perched at 0.27, implying a roughly 1-in-4 chance the option will be in the money at the close on Friday, May 16, when back-month options expire. Should the stock continue to wallow south of the strike price, the most the traders have risked is the initial premium paid. At last check, General Motors Company (NYSE:GM) was sitting 0.6% below breakeven to trade at $34.53.


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