Option Bulls Can't Quit General Motors Company (GM)

General Motors Company call options are trading at an accelerated clip

Dec 24, 2014 at 10:46 AM
facebook X logo linkedin


General Motors Company (NYSE:GM) is being a proverbial Scrooge this morning, sitting out the broad-market trend higher. The stock was last seen 0.5% lower at $33.40, bringing its 2014 deficit to 18.3%. Nevertheless, option traders remain eternally optimistic, with calls trading at almost twice the typical intraday rate.

Roughly 14,000 GM calls have changed hands, compared to fewer than 1,100 puts. Most active are the January 2015, February, and March 35-strike calls, where a healthy portion of the contracts were seemingly bought to open. By purchasing the calls to open, the buyers expect GM to climb back atop $35 within the options' respective lifetimes.

On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the automaker's 10-day call/put volume ratio of 2.78 stands higher than 90% of all other readings from the past year. In other words, GM option buyers have picked up calls over puts at a much faster-than-usual clip during the past two weeks.

However, this bullish bias seems unwarranted. On the charts, GM has struggled during the past year, with rebound attempts stymied by its 10-month moving average -- a trendline that hasn't been conquered on a monthly closing basis since January. Off the charts, compensation claims related to faulty ignition switches continue to climb, and the impact of the ruble-related suspension of sales in Russia has yet to be seen.

Monthly Chart of GM since August 2013 with 10-Month Moving Average

Should General Motors Company (NYSE:GM) continue to struggle both technically and fundamentally, an unwinding of optimism in the options pits could exacerbate selling pressure on the shares. Likewise, seven out of 13 analysts maintain "buy" or better opinions, and the average 12-month price target of $40 sits in territory not charted in nearly a year. A wave of downgrades and/or price-target reductions could also pressure GM lower.

 

Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on C3.ai calls
238.5% GAIN on Oracle calls

 
 
 


 
 

Rainmaker Ads CGI