Puts Popular as GM Stock Rallies

GM plans to produce 20,000 masks by mid-week

by Jake Scott

Published on Apr 6, 2020 at 2:09 PM

As many experts estimate the COVID-19 pandemic will reach its peak in the U.S. this week, General Motors (NYSE: GM) asked its 600 suppliers to help manufacture medical masks by offering to share its manufacturing plans for producing personal protective equipment. GM is expected to produce 20,000 masks which will be ready to deliver by April 8. Plus, a Reuters report indicated the automaker was looking to extend maturities on $6 billion in revolving loans. At last check, GM stock is up 6.9% trading at $19.23.

Daily Stock Chart GM

Today’s jump has run out of steam at the shares' 20-day moving average, a trendline that’s acted as pressure on the charts since a mid-February bear gap. The security still sits at a staggering 50% deficit year-over-year; however, it has managed to bounce back 36.1% from its March 18 record low of $14.33.

Analysts are bullish on GM stock. Currently, of the 11 in coverage, nine sport a “buy” or better position. The remaining two say “hold,” with zero "sells" on the books. This is mirrored by the stock’s current consensus 12-month price target of $37.50 which is a significant 94.3% premium of the stock’s current levels.

In the options pits, puts are preferred to calls. GM sports a 10-day put/call volume ratio of 1.23 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits in the elevated 84th percentile of its annual range, implying the appetite for puts is higher than usual.

Echoing this, GM's Schaeffer's put/call open interest ratio (SOIR) of 1.35 sits in the 97th percentile of its annual range, suggesting that short-term options players haven't been more put-heavy during the past 12 months. 

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