General Motors Delays Nikola Deal Amid Controversy

Sentiment surrounding GM has been bullish of late

Deputy Editor
Sep 30, 2020 at 11:03 AM
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The shares of General Motors Company (NYSE:GM) are pivoting higher, last seen up 2% to trade at $29.30 this morning, after the company said it is unlikely to close its $2 billion deal with Nikola (NKLA) before the end of Wednesday, though talks will continue between the two companies. This comes amid allegations of sexual abuse and fraud against Nikola's former executive chairman Trevor Milton. Just last week, Nikola named former vice-chairman of General Motors, Stephen Girsky, as Milton's replacement. 

While the stock pulled back in late September, following a six-month peak of $33.33 on Sept. 8, the 50-day moving average acted as a net on the charts, keeping GM at a six-month lead of over 53%. The security is still staring up at its 20-day moving average, however, which acted as a previous area of support before it gapped lower.  

Meanwhile, calls are dominating in the options pits. This is per GM's 50-day call/put volume ratio of 3.96 at the International Securities Exchange (ISE), Cboe Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits higher than all but 8% of readings from the past 12 months, suggesting a healthier-than-usual appetite for long calls of late. Echoing this, General Motors stock's Schaeffer's put/call open interest ratio (SOIR) of 0.45 stands in the 9th percentile of its annual range. This suggests short-term option traders are unusually call-biased at the moment.  

Options look like the way to go if you're looking to get in on General Motor stock. In fact, GM's Schaeffer's Volatility Index of 44% stands higher than just 12% of readings in the past 12 months. This means options players are pricing in relatively low volatility expectations at the moment. 

 

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